<Page>
FILED PURSUANT TO GENERAL
INSTRUCTION II.K. OF FORM F-9;
FILE NO. 333-105076
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED MAY 14, 2003.
[LOGO]
US $300,000,000 4.00% SENIOR NOTES DUE 2013
US $300,000,000 5.35% SENIOR NOTES DUE 2033
The 2013 Notes and the 2033 Notes, referred to collectively in this prospectus
supplement as the "Securities", will bear interest at the rate of 4.00% per year
and 5.35% per year, respectively. We will pay interest on the Securities on
January 15 and July 15 of each year, beginning on January 15, 2004. The
2013 Notes will mature on July 15, 2013 and the 2033 Notes will mature on
July 15, 2033. The Securities will be issued only in denominations of US $1,000
and integral multiples of US $1,000.
We may redeem some or all of the Securities at any time at the redemption prices
described in this prospectus supplement. We may also redeem all of the
Securities at any time in the event certain changes affecting Canadian
withholding taxes occur. The Securities will not be entitled to the benefit of
any sinking funds.
INVESTING IN THE SECURITIES INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON
PAGE 27 OF THE ACCOMPANYING PROSPECTUS.
WE ARE PERMITTED, UNDER A MULTIJURISDICTIONAL DISCLOSURE SYSTEM ADOPTED BY THE
UNITED STATES AND CANADA, TO PREPARE THIS PROSPECTUS SUPPLEMENT IN ACCORDANCE
WITH CANADIAN DISCLOSURE REQUIREMENTS, WHICH ARE DIFFERENT FROM THOSE OF THE
UNITED STATES. WE PREPARE OUR FINANCIAL STATEMENTS IN ACCORDANCE WITH CANADIAN
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, AND THEY ARE SUBJECT TO CANADIAN
AUDITING AND AUDITOR INDEPENDENCE STANDARDS. THEY MAY NOT BE COMPARABLE TO THE
FINANCIAL STATEMENTS OF U.S. COMPANIES.
YOU SHOULD BE AWARE THAT OWNING THESE SECURITIES MAY HAVE TAX CONSEQUENCES BOTH
IN THE UNITED STATES AND CANADA. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS MAY NOT DESCRIBE THESE TAX CONSEQUENCES FULLY. YOU SHOULD READ THE
TAX DISCUSSION IN THIS PROSPECTUS SUPPLEMENT.
YOUR ABILITY TO ENFORCE CIVIL LIABILITIES UNDER U.S. FEDERAL SECURITIES LAWS MAY
BE AFFECTED ADVERSELY BY THE FACT THAT WE ARE CONTINUED UNDER THE LAWS OF
CANADA, MOST OF OUR OFFICERS AND DIRECTORS AND MOST OF THE EXPERTS NAMED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS ARE RESIDENTS OF CANADA,
AND ALL OR A SUBSTANTIAL PORTION OF OUR ASSETS ARE LOCATED OUTSIDE THE
UNITED STATES.
THESE SECURITIES HAVE NOT BEEN QUALIFIED FOR SALE UNDER THE SECURITIES LAWS OF
ANY PROVINCE OR TERRITORY OF CANADA AND ARE NOT BEING AND MAY NOT BE OFFERED OR
SOLD, DIRECTLY OR INDIRECTLY, IN CANADA OR TO ANY RESIDENT OF CANADA IN
CONTRAVENTION OF THE SECURITIES LAWS OF ANY PROVINCE OR TERRITORY OF CANADA.
THERE IS NO MARKET THROUGH WHICH THESE SECURITIES MAY BE SOLD AND PURCHASERS MAY
NOT BE ABLE TO RESELL SECURITIES PURCHASED UNDER THIS PROSPECTUS SUPPLEMENT.
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS INCLUDE (THROUGH
INCORPORATION BY REFERENCE) FINANCIAL STATEMENTS AUDITED BY ARTHUR ANDERSEN LLP
FOR WHICH WE DID NOT OBTAIN THE CONSENT OF ARTHUR ANDERSEN LLP TO THE USE OF ITS
AUDIT REPORT. BECAUSE ARTHUR ANDERSEN LLP HAS NOT PROVIDED ITS CONSENT,
PURCHASERS OF THESE SECURITIES WILL NOT HAVE THE STATUTORY RIGHT OF ACTION FOR
DAMAGES AGAINST ARTHUR ANDERSEN LLP PRESCRIBED BY APPLICABLE SECURITIES
LEGISLATION. SEE "WHERE YOU CAN FIND MORE INFORMATION" AND "RISK FACTORS" IN THE
ACCOMPANYING PROSPECTUS AND "EXPERTS" IN THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS.
NEITHER THE U.S. SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<Table>
<Caption>
PER 2013 NOTE TOTAL PER 2033 NOTE TOTAL
Public offering price 99.538% US $298,614,000 99.388% US $298,164,000
Underwriting commission 0.650% US $1,950,000 0.875% US $2,625,000
Proceeds, before expenses, to Petro-Canada 98.888% US $296,664,000 98.513% US $295,539,000
</Table>
The public offering price set forth above does not include accrued interest, if
any. Interest on the Securities will accrue from June 20, 2003.
DEUTSCHE BANK SECURITIES RBC CAPITAL MARKETS
(BOOKRUNNING MANAGER)
------------------------------------------------------------
BANC ONE CAPITAL MARKETS CITIGROUP JPMORGAN
-------------------------------------------
BMO NESBITT BURNS
CIBC WORLD MARKETS
<Page>
SCOTIA CAPITAL
TD SECURITIES
BNP PARIBAS
The date of this prospectus supplement is June 17, 2003
<Page>
IMPORTANT NOTICE ABOUT INFORMATION IN
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
This document is in two parts. The first part is this prospectus supplement,
which describes the specific terms of the Securities being offered and adds to
certain information contained in the accompanying prospectus and the documents
incorporated by reference. The second part, the accompanying base shelf
prospectus dated May 14, 2003, gives more general information, some of which may
not apply to the Securities being offered. The accompanying base shelf
prospectus is referred to as the "accompanying prospectus" or the "prospectus"
in this prospectus supplement.
IF THE DESCRIPTION OF THE SECURITIES VARIES BETWEEN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION
IN THIS PROSPECTUS SUPPLEMENT.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT OR ADDITIONAL INFORMATION.
WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN ANY JURISDICTION WHERE THE
OFFER OR SALE IS NOT PERMITTED BY LAW. YOU SHOULD NOT ASSUME THAT THE
INFORMATION CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN
THE DATE ON THE FRONT OF THIS PROSPECTUS SUPPLEMENT.
In this prospectus supplement, unless otherwise specified or the context
otherwise requires, references to "Petro-Canada", the "Corporation", "us", "we"
or "our" mean Petro-Canada and its subsidiaries. Unless otherwise specified, all
dollar amounts contained in this prospectus supplement and in the accompanying
prospectus are expressed in Canadian dollars, and references to "dollars", "Cdn
$" or "$" are to Canadian dollars and all references to "US $" are to
United States dollars. All financial information included and incorporated by
reference in this prospectus supplement and in the accompanying prospectus is
prepared using generally accepted accounting principles which are in effect from
time to time in Canada, which we refer to as "Canadian GAAP". "U.S. GAAP" means
generally accepted accounting principles which are in effect from time to time
in the United States.
ANY STATEMENT CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR IN THE ACCOMPANYING
PROSPECTUS OR IN A DOCUMENT INCORPORATED OR DEEMED TO BE INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR IN THE ACCOMPANYING PROSPECTUS SHALL
BE DEEMED TO BE MODIFIED OR SUPERSEDED FOR PURPOSES OF THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS TO THE EXTENT THAT A STATEMENT
CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS OR IN ANY
OTHER SUBSEQUENTLY FILED DOCUMENT WHICH ALSO IS OR IS DEEMED TO BE INCORPORATED
BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR IN THE ACCOMPANYING PROSPECTUS
MODIFIES OR SUPERSEDES SUCH PRIOR STATEMENT. ANY STATEMENT OR DOCUMENT SO
MODIFIED OR SUPERSEDED SHALL NOT, EXCEPT TO THE EXTENT SO MODIFIED OR
SUPERSEDED, BE INCORPORATED BY REFERENCE IN AND CONSTITUTE A PART OF THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS.
S-2
<Page>
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<Table>
<Caption>
PAGE NO.
--------
Documents Incorporated by Reference......................... S-3
Currency Exchange Rates..................................... S-4
Forward Looking Statements.................................. S-5
Summary of the Offering..................................... S-7
Petro-Canada................................................ S-9
Selected Consolidated Financial and Operating Information... S-9
Use of Proceeds............................................. S-14
Consolidated Capitalization................................. S-15
Description of the Securities............................... S-15
Interest Coverage........................................... S-19
Credit Ratings.............................................. S-20
Certain Income Tax Information.............................. S-21
Underwriting................................................ S-24
Legal Matters............................................... S-26
Experts..................................................... S-26
PROSPECTUS
About This Prospectus....................................... 2
Where You Can Find More Information......................... 3
Forward Looking Statements.................................. 5
Petro-Canada................................................ 7
Use of Proceeds............................................. 9
Interest Coverage........................................... 9
Description of Debt Securities.............................. 10
Plan of Distribution........................................ 26
Certain Income Tax Considerations........................... 27
Risk Factors................................................ 27
Legal Matters............................................... 31
Experts..................................................... 31
Documents Filed as Part of the U.S. Registration
Statement................................................. 32
Index to Financial Statements............................... F-1
</Table>
DOCUMENTS INCORPORATED BY REFERENCE
This prospectus supplement is deemed to be incorporated by reference in the
accompanying prospectus solely for the purposes of the offering of the
Securities. Other documents are also incorporated or deemed to be incorporated
by reference in the accompanying prospectus. See "Where You Can Find More
Information" in the accompanying prospectus. The following documents are
specifically incorporated by reference in and form an integral part of the
accompanying prospectus and supersede documents of a similar nature that were
previously incorporated by reference:
- our management proxy circular dated March 6, 2003, excluding the
information contained therein under the headings "Executive
Compensation--Report on Executive Compensation" and "Executive
Compensation--Performance Graph";
- our annual information form dated March 6, 2003, including the information
incorporated therein under the heading "Management's Discussion
and Analysis";
S-3
<Page>
- our audited consolidated financial statements as at and for the years
ended December 31, 2002, 2001 and 2000, together with the notes thereto
and the reports of the auditors thereon;
- our unaudited interim consolidated financial statements as at March 31,
2003 and for the three months ended March 31, 2003 and March 31, 2002;
- the information contained under the heading "Management's Discussion and
Analysis" contained in our Quarterly Report to Shareholders for the three
months ended March 31, 2003;
- our material change report dated March 20, 2003 with respect to the
retirement of Norman F. McIntyre as President in 2004; and
- our material change report dated May 14, 2003 with respect to the filing
of the accompanying prospectus.
Any documents of the type referred to in the preceding paragraph, or similar
material, including all annual information forms, all information circulars, all
financial statements, all material change reports (excluding confidential
reports, if any), all updated interest coverage ratio information, as well as
all prospectus supplements disclosing additional or updated information, filed
by us with securities commissions or similar authorities in the relevant
provinces of Canada subsequent to the date of this prospectus supplement and
prior to 25 months from the date of the accompanying prospectus shall be deemed
to be incorporated by reference into this prospectus supplement and the
accompanying prospectus. To the extent that any document or information
incorporated by reference in this prospectus supplement or the accompanying
prospectus is included in a report that is filed with or furnished to the SEC on
Form 40-F, 20-F, 10-K, 10-Q, 8-K or 6-K (or any respective successor form), such
document or information shall also be deemed to be incorporated by reference as
an exhibit to the registration statement of which this prospectus supplement and
the accompanying prospectus form a part.
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS INCORPORATE BY
REFERENCE FINANCIAL STATEMENTS AUDITED BY ARTHUR ANDERSEN LLP FOR WHICH WE DID
NOT OBTAIN THE CONSENT OF ARTHUR ANDERSEN LLP TO THE USE OF ITS AUDIT REPORT.
ARTHUR ANDERSEN LLP'S CONSENT WAS NOT OBTAINED BECAUSE, ON JUNE 3, 2002, ARTHUR
ANDERSEN LLP CEASED TO PRACTICE PUBLIC ACCOUNTING IN CANADA. BECAUSE ARTHUR
ANDERSEN LLP HAS NOT PROVIDED ITS CONSENT, PURCHASERS OF THE SECURITIES UNDER
THIS PROSPECTUS SUPPLEMENT WILL NOT HAVE THE STATUTORY RIGHT OF ACTION FOR
DAMAGES AGAINST ARTHUR ANDERSEN LLP PRESCRIBED BY APPLICABLE SECURITIES
LEGISLATION. ARTHUR ANDERSEN LLP MAY NOT HAVE SUFFICIENT ASSETS AVAILABLE TO
SATISFY JUDGMENTS AGAINST IT. PLEASE READ "RISK FACTORS--YOU WILL NOT BE ABLE TO
RECOVER DAMAGES FROM ARTHUR ANDERSEN LLP WITH RESPECT TO THEIR AUDIT REPORT
WHICH IS INCORPORATED INTO THIS PROSPECTUS" IN THE ACCOMPANYING PROSPECTUS.
CURRENCY EXCHANGE RATES
We publish our consolidated financial statements in Canadian dollars. The
following table sets forth, for each period indicated, the high and low exchange
rates, the average of such exchange rates on the last business day of each month
during such period, and the exchange rate at the end of such period, based on
the noon buying rate in The City of New York for cable transfers in Canadian
dollars as certified for customs purposes by the Federal Reserve Bank of
New York (the "noon buying rate"). These rates are set forth as United States
dollars per Cdn $1.00 and are the inverse of rates quoted by the Federal Reserve
Bank of New York for Canadian dollars per US $1.00. On June 17, 2003, the
inverse of the noon buying rate was Cdn $1.00 equals US $0.7467.
<Table>
<Caption>
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
------------------- ------------------------------
2003 2002 2002 2001 2000
-------- -------- -------- -------- --------
High.................................................. 0.6822 0.6342 0.6619 0.6697 0.6969
Low................................................... 0.6349 0.6200 0.6200 0.6241 0.6410
Average............................................... 0.6623 0.6271 0.6368 0.6457 0.6732
Period End............................................ 0.6805 0.6267 0.6329 0.6279 0.6669
</Table>
S-4
<Page>
FORWARD LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus contain or
incorporate by reference forward-looking statements within the meaning of the
United States Private Securities Litigation Reform Act of 1995. All statements
other than statements of historical fact included or incorporated by reference
in this prospectus supplement and the accompanying prospectus and that address
activities, events or developments that we expect or anticipate may or will
occur in the future are forward-looking statements. Forward-looking statements
contained or incorporated by reference in this prospectus supplement and the
accompanying prospectus include, but are not limited to, references to:
- future capital and other expenditures (including the amount, nature and
sources of funding thereof);
- oil and gas production levels and the sources of their growth;
- tax and royalty rates;
- oil and gas prices;
- the Canadian dollar exchange rate with United States dollars and other
foreign currencies;
- interest rates;
- refining and marketing margins;
- demand for refined petroleum products;
- planned facilities construction and expansion;
- retail site throughputs;
- pre-production and operating costs;
- reserve estimates;
- reserve life;
- natural gas export capacity;
- plans for and results of exploration and development activities;
- environmental matters;
- drilling plans;
- acquisition and disposition of resource properties; and
- the dates by which certain areas and facilities will be developed or will
come on stream.
Undue reliance should not be placed on these forward-looking statements,
which are based upon our assumptions and are subject to known and unknown risks
and uncertainties and other factors which may cause actual results, levels of
activity and achievements to differ materially from those estimated or projected
and expressed in or implied by such statements. Such factors include, but are
not limited to:
- general economic, market and business conditions;
- industry capacity;
- competitive action by other companies;
- fluctuations in oil and gas prices;
- refining and marketing margins;
- the ability to produce and transport crude oil and natural gas to markets;
S-5
<Page>
- the results of exploration and development drilling and related
activities;
- fluctuation in foreign currency exchange rates and interest rates;
- the ability of suppliers to meet commitments;
- actions by governmental authorities including increases in taxes;
- political or geopolitical changes;
- decisions or approvals of administrative tribunals;
- changes in environmental and other regulations;
- the availability of capital markets;
- risks attendant with oil and gas operations; and
- other factors, many of which are beyond our control.
These and additional factors are described in more detail in our
management's discussion and analysis of financial condition and results of
operations in our annual information form dated March 6, 2003, filed with the
securities commissions or similar authorities in the provinces of Canada and
incorporated by reference in this prospectus supplement and the accompanying
prospectus. We undertake no obligation to update publicly or revise any
forward-looking statements contained in this prospectus supplement and the
accompanying prospectus, and such statements are expressly qualified by this
cautionary statement. You should also carefully consider the matters discussed
under "Risk Factors" in the accompanying prospectus.
S-6
<Page>
SUMMARY OF THE OFFERING
The following is a brief summary of some of the terms of this offering. For
a more complete description of the terms of the Securities, see "Description of
the Securities" in this prospectus supplement and "Description of Debt
Securities" in the accompanying prospectus.
<Table>
Issue............................. US $300,000,000 principal amount of 4.00% senior notes due
2013 (the "2013 Notes").
US $300,000,000 principal amount of 5.35% senior notes due
2033 (the "2033 Notes").
Maturity Date..................... July 15, 2013 for the 2013 Notes.
July 15, 2033 for the 2033 Notes.
Interest Payment Dates............ January 15 and July 15 of each year, beginning
January 15, 2004.
Ranking........................... The Securities will be our direct unsecured senior
obligations ranking at least equally and ratably with all of
our other unsecured senior indebtedness from time to time
outstanding. The Securities will also be effectively
subordinated to all existing and future liabilities,
including trade payables and other indebtedness, of our
subsidiaries, partnerships and other entities through which
we conduct our operations. At May 31, 2003, our
subsidiaries, partnerships and other entities through which
we conduct our operations had approximately $625 million of
indebtedness and other liabilities, excluding intercompany
indebtedness and guarantees. See "Description of the
Securities--General" in this prospectus supplement and
"Description of Debt Securities--Ranking and Other
Indebtedness" in the accompanying prospectus.
Redemption........................ We may redeem some or all of the Securities at any time at
the redemption prices described in this prospectus
supplement. See "Description of the Securities--Optional
Redemption" in this prospectus supplement. We may also
redeem the Securities, in whole but not in part, at the
redemption price described in the accompanying prospectus at
any time in the event certain changes affecting Canadian
withholding taxes occur. See "Description of Debt
Securities--Tax Redemption" in the accompanying prospectus.
Form and Denominations............ Each of the 2013 Notes and the 2033 Notes will be
represented by one or more global notes registered in the
name of Cede & Co., a nominee of The Depository Trust
Company. Beneficial interests in any global note will be in
denominations of US $1,000 and integral multiples thereof.
Except as described under "Description of the Securities" in
this prospectus supplement and "Description of Debt
Securities" in the accompanying prospectus, Securities in
definitive form will not be issued.
Certain Covenants................. The indenture governing the Securities contains covenants
that, among other things:
- limit our ability to create liens on certain of our
property;
- limit our ability to enter into sale and leaseback
transactions with respect to certain of our existing
property; and
- restrict our ability to consolidate or merge with, or
transfer all or substantially all of our assets to, another
person.
</Table>
S-7
<Page>
<Table>
These covenants are subject to important exceptions and
qualifications which are described under the caption
"Description of Debt Securities" in the accompanying
prospectus.
Additional Amounts................ We will make payments on the Securities without withholding
or deduction for Canadian taxes unless required to be
withheld or deducted by law or the interpretation or
administration thereof in which case, subject to certain
exceptions, we will pay such additional amounts as may be
necessary so that the net amount received by holders of the
Securities after such withholding or deduction will not be
less than the amount that such holders would have received
in the absence of such withholding or deduction. See
"Description of Debt Securities--Additional Amounts" in the
accompanying prospectus.
Use of Proceeds................... The net proceeds to us from this offering will be
approximately US $591.0 million, after deducting
underwriting commissions, and after deducting estimated
expenses of the offering of US $1.2 million. All of the
net proceeds received by us from the sale of the Securities
will be used to repay a portion of the debt we incurred in
connection with our acquisition of most of the upstream oil
and gas operations of Veba Oil & Gas GmbH in 2002. See "Use
of Proceeds" in this prospectus supplement.
Governing Law..................... The Securities and the indenture governing the Securities
will be governed by the laws of the State of New York.
</Table>
S-8
<Page>
PETRO-CANADA
We are an integrated oil and gas company, a leader in the Canadian petroleum
industry, with a portfolio of businesses spanning both the upstream and
downstream sectors of the industry. In the upstream sector, we explore for,
develop, produce and market crude oil and natural gas in Canada and
internationally. Our downstream sector refines crude oil and other feedstocks
and markets and distributes petroleum products and related goods and services,
primarily in Canada but with some international marketing, especially for
lubricants. Our core businesses are East Coast Oil, Oil Sands, North American
Natural Gas, International and Downstream, each of which is discussed in the
accompanying prospectus and the documents incorporated by reference.
SELECTED CONSOLIDATED FINANCIAL AND OPERATING INFORMATION
The following tables set forth selected consolidated financial and operating
information as at and for the three months ended March 31, 2003 and 2002, as at
and for the year ended December 31, 2002 on a pro forma basis giving effect to
our acquisition of most of the upstream oil and gas assets of Veba Oil &
Gas GmbH on May 2, 2002 as though it was completed on January 1, 2002, and as at
and for the years ended December 31, 2002, 2001 and 2000.
The selected consolidated financial information has been derived from our
unaudited interim consolidated financial statements, our unaudited pro forma
consolidated statement of earnings and our audited annual consolidated financial
statements for the periods indicated. Deloitte & Touche LLP, Chartered
Accountants, audited the consolidated financial statements for the year ended
December 31, 2002. Arthur Andersen LLP, Chartered Accountants, audited the
consolidated financial statements for each of the previous two years.
The pro forma selected operating information for the year ended
December 31, 2002 is derived from information contained in our annual
information form dated March 6, 2003, which is incorporated by reference in the
accompanying prospectus, and from operating information of the businesses
acquired as part of the Veba acquisition. The selected pro forma financial
information has been derived from our audited consolidated statement of earnings
for the year ended December 31, 2002 and the audited statement of earnings of
the businesses acquired as part of the Veba acquisition for the period
January 1, 2002 to May 1, 2002. The pro forma financial and operating
information is presented for illustrative purposes only and is not necessarily
indicative of actual financial or operating results for a full year or any
interim period.
In addition, certain segmented financial information for our business units
is set forth for the periods indicated.
Our consolidated financial statements are presented in Canadian dollars and
are prepared in accordance with Canadian GAAP, which differs from U.S. GAAP. For
a discussion of the principal differences between our financial results as
calculated under Canadian GAAP and under U.S. GAAP, you should refer to note 23
of our audited annual consolidated financial statements as at and for the year
ended December 31, 2002, incorporated by reference in the accompanying
prospectus.
You should read this information in conjunction with our audited
consolidated financial statements as at and for the year ended December 31,
2002, management's discussion and analysis for the year ended December 31, 2002,
our unaudited consolidated financial statements as at and for the three months
ended March 31, 2003 and our management's discussion and analysis for the three
months ended March 31, 2003, all of which are incorporated by reference in the
accompanying prospectus, and our unaudited pro forma consolidated statement of
earnings for the year ended December 31, 2002 included in the accompanying
prospectus and which gives effect to the Veba acquisition as though the
transaction was completed on January 1, 2002.
S-9
<Page>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
<Table>
<Caption>
THREE MONTHS PRO FORMA
ENDED MARCH 31, YEAR ENDED YEARS ENDED DECEMBER 31,
------------------- DECEMBER 31, ------------------------------
2003 2002 2002 2002 2001 2000
-------- -------- ------------- -------- -------- --------
(IN MILLIONS, EXCEPT RATIOS)
STATEMENT OF EARNINGS ITEMS:
Revenue.............................. $ 3 507 $ 1708 $10 468 $ 9 917 $ 8 736 $ 9 545
Expenses
Crude oil and product purchases.... 1 453 885 4 556 4 556 4 687 5 537
Operating, marketing and general... 588 397 2 180 2 036 1 670 1 619
Exploration........................ 121 106 319 301 245 171
Depreciation, depletion and
amortization..................... 343 162 1 063 957 568 584
Foreign currency translation....... (97) 1 49 52 102 67
Interest........................... 48 30 218 187 135 144
Earnings before income taxes......... 1 051 127 2 083 1 828 1 329 1 423
Net earnings......................... 584 88 1 115 974 846 859
STATEMENT OF CASH FLOWS ITEMS:
Cash flow(1)......................... $ 991 $ 287 $ 2 276 $ 1 688 $ 1 870
Cash flow from operating
activities......................... 827 130 2 050 1 743 1 957
Expenditures on property, plant and
equipment and exploration.......... 516 370 1 861 1 681 1 203
Acquisition of oil and gas operations
of Veba Oil & Gas GmbH............. -- -- $ 2 234 2 234 -- --
BALANCE SHEET ITEMS (AT PERIOD END):
Total assets......................... $13 959 $9 719 $13 439 $ 9 634 $10 000
Total debt........................... 2 609 1 401 3 057 1 401 1 774
Shareholders' equity................. 6 639 4 942 5 776 4 877 4 465
OTHER FINANCIAL DATA AND RATIOS:
EBITDAX(2)(4)........................ $ 4 411 $1 889 $ 3 683 $ 3 273 $ 2 277 $ 2 322
Interest(3)(4)....................... 209 141 222 191 151 156
Debt to cash flow(1)(4) (times)...... 0.9x 1.0x 1.3x 0.8x 0.9x
Interest coverage--EBITDAX
basis(2)(3)(4) (times)............. 21.1x 13.4x 16.6x 17.1x 15.1x 14.9x
Debt to debt plus equity (percent)... 28.2% 22.1% 34.6% 22.3% 28.4%
U.S. GAAP STATEMENT OF EARNINGS ITEM:
Net earnings(5)...................... $ 895 $ 847 $ 839
</Table>
- ------------
Notes
(1) We use cash flow (which is expressed before changes in non-cash working
capital) to analyze our operating performance, leverage and liquidity. Cash
flow does not have any standardized meaning prescribed by Canadian GAAP and
therefore it may not be comparable with the calculation of similar measures
for other companies. Cash flow is not intended to represent our operating
cash flows or operating profits for the period nor should it be viewed as an
alternative to cash flow
S-10
<Page>
from operating activities, net earnings or other measures of financial
performance calculated in accordance with Canadian GAAP. The following table
provides a reconciliation of cash flow from net earnings:
<Table>
<Caption>
THREE
MONTHS
ENDED YEARS ENDED
MARCH 31, DECEMBER 31,
------------------- ------------------------------
2003 2002 2002 2001 2000
-------- -------- -------- -------- --------
Net earnings................................................ $584 $ 88 $ 974 $ 846 $ 859
Items not affecting cash flow:
Depreciation, depletion and amortization.................. 343 162 957 568 584
Future income taxes....................................... 26 (76) (105) (45) 201
Provision for future removal and site restoration......... 7 4 27 17 30
(Gain) loss on translation of foreign currency denominated
long-term debt.......................................... (97) 1 (11) 102 67
Foreign currency losses................................... -- -- 90 -- --
Loss (gain) on disposal of assets......................... -- -- 2 (49) (73)
Other..................................................... 7 2 41 4 31
Exploration expenses........................................ 121 106 301 245 171
---- ---- ------ ------ ------
Cash Flow................................................... $991 $287 $2 276 $1 688 $1 870
==== ==== ====== ====== ======
</Table>
(2) EBITDAX represents earnings before income taxes, interest expense,
depreciation, depletion and amortization and exploration expenses. EBITDAX
does not have any standardized meaning prescribed by Canadian GAAP and
therefore may not be comparable with the calculation of similar measures for
other companies. EBITDAX is presented because it is frequently used to
evaluate a company's ability to service debt. We believe that EBITDAX, while
providing useful information, should not be considered in isolation or as a
substitute for net earnings as an indicator of operating performance or as
an alternative to cash flow as a measure of liquidity. The following table
provides a reconciliation of EBITDAX from net earnings:
<Table>
<Caption>
12 MONTHS
ENDED PRO FORMA YEARS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------- DECEMBER 31, ------------------------------
2003 2002 2002 2002 2001 2000
-------- -------- ------------- -------- -------- --------
Net earnings........................................... $1 470 $ 652 $1 115 $ 974 $ 846 $ 859
Add:
Provision for income taxes........................... 1 282 279 968 854 483 564
Interest expense..................................... 205 127 218 187 135 144
Depreciation, depletion and amortization............. 1 138 591 1 063 957 568 584
Exploration expenses................................. 316 240 319 301 245 171
------ ------ ------ ------ ------ ------
EBITDAX................................................ $4 411 $1 889 $3 683 $3 273 $2 277 $2 322
====== ====== ====== ====== ====== ======
</Table>
(3) Interest includes both expensed and capitalized interest amounts.
(4) Trailing 12 month period.
(5) The difference between U.S. GAAP net earnings and Canadian GAAP net earnings
for the year ended December 31, 2002 is primarily attributed to differences
in the accounting for income taxes.
S-11
<Page>
SELECTED SEGMENTED FINANCIAL INFORMATION(1)
<Table>
<Caption>
THREE MONTHS PRO FORMA
ENDED MARCH 31, YEAR ENDED YEARS ENDED DECEMBER 31,
------------------- DECEMBER 31, ------------------------------
2003 2002 2002 2002 2001 2000
-------- -------- ------------- -------- -------- --------
(IN MILLIONS)
UPSTREAM
CANADA
Revenue................................ $ 941 $ 431 $2 322 $2 322 $2 132 $2 278
Earnings before income taxes........... 543 105 1 057 1 057 1 107 1 304
Net earnings........................... 341 73 688 688 719 798
Cash flow (before changes in non-cash
working capital)..................... 640 240 1 417 1 417 1 125 1 460
Expenditures on property, plant and
equipment and exploration............ 357 321 1 281 1 281 1 131 884
Total assets........................... 6 177 5 413 5 922 5 922 5 118 4 811
INTERNATIONAL
Revenue................................ $ 552 $ 3 $1 790 $1 239 $ 20 $ 59
Earnings (loss) before income taxes.... 269 (9) 933 647 (46) (40)
Net earnings (loss).................... 64 (6) 385 225 (27) (22)
Cash flow (before changes in non-cash
working capital)..................... 256 4 583 27 78
Acquisition of oil and gas operations
of Veba Oil & Gas GmbH............... -- -- 2 234 2 234 -- --
Expenditures on property, plant and
equipment and exploration............ 102 16 221 153 43
Total assets........................... 3 747 171 3 544 186 148
DOWNSTREAM
Revenue................................ $2 322 $1 469 $7 321 $7 321 $7 164 $7 788
Earnings before income taxes........... 218 72 418 418 477 457
Net earnings........................... 130 45 257 257 301 272
Cash flow (before changes in non-cash
working capital)..................... 135 64 380 380 589 434
Expenditures on property, plant and
equipment and exploration............ 56 32 344 344 383 264
Total assets........................... 3 962 3 653 3 841 3 841 3 556 3 609
</Table>
- ------------
Notes
(1) Information in this table does not include our shared services segment which
includes investment income, interest expense, foreign currency translation
and general corporate revenue and expense. You should refer to Note 4 of our
audited annual consolidated financial statements as at and for the year
ended December 31, 2002, incorporated by reference in the accompanying
prospectus.
S-12
<Page>
SELECTED OPERATING INFORMATION
In this table, "bbls", "mbbls" and "mmbbls" means barrels, thousand barrels,
and million barrels, respectively, "mmcf" and "bcf" means million cubic feet and
billion cubic feet, respectively, "mcm" means thousands of cubic meters per day,
and "mboe" and "mmboe" means thousand barrels of oil equivalent and million
barrels of oil equivalent, respectively. For the purpose of determining barrels
of oil equivalent production and reserves, natural gas is converted using 6 000
cubic feet of gas for one barrel of oil.
<Table>
<Caption>
THREE MONTHS PRO FORMA
ENDED MARCH 31, YEAR ENDED YEARS ENDED DECEMBER 31,
------------------- DECEMBER 31, ------------------------------
2003 2002 2002 2002 2001 2000
-------- -------- ------------- -------- -------- --------
UPSTREAM
AVERAGE DAILY PRODUCTION (before royalties)
NORTH AMERICA
Crude oil and natural gas liquids
(mbbls/day)............................. 138.0 106.0 119.4 119.4 75.1 76.6
Natural gas (mmcf/day)(1)................. 714 731 722 722 714 738
Total barrels of oil equivalent
(mboe/day).............................. 257 228 239 239 195 199
INTERNATIONAL(2)(3)
Crude oil and natural gas liquids
(mbbls/day)(4).......................... 183.2 1.8 180.6 125.5 2.3 12.6
Natural gas (mmcf/day)(1)................. 178 -- 155 103 -- --
Total barrels of oil equivalent
(mboe/day).............................. 213 2 206 143 2 13
AVERAGE DAILY PRODUCTION (after royalties)
NORTH AMERICA
Crude oil and natural gas liquids
(mbbls/day)............................. 113.3 67.8 65.9
Natural gas (mmcf/day).................... 557 533 563
Total barrels of oil equivalent
(mboe/day).............................. 206 157 160
INTERNATIONAL
Crude oil and natural gas liquids
(mbbls/day)............................. 75.2 1.5 11.0
Natural gas (mmcf/day).................... 81 -- --
Total barrels of oil equivalent
(mboe/day).............................. 89 1 11
PROVED DEVELOPED AND UNDEVELOPED RESERVES
(before royalties)
CANADA
Crude oil and natural gas liquids
(mmbbls)................................ 479 479 439 412
Natural gas (bcf)......................... 2 181 2 181 2 228 2 331
Total barrels of oil equivalent (mmboe)... 843 843 810 801
INTERNATIONAL(7)
Crude oil and natural gas liquids
(mmbbls)................................ 351 351 11 2
Natural gas (bcf)......................... 578 578 -- --
Total barrels of oil equivalent (mmboe)... 447 447 11 2
</Table>
S-13
<Page>
<Table>
<Caption>
THREE MONTHS PRO FORMA
ENDED MARCH 31, YEAR ENDED YEARS ENDED DECEMBER 31,
------------------- DECEMBER 31, ------------------------------
2003 2002 2002 2002 2001 2000
-------- -------- ------------- -------- -------- --------
PROVED DEVELOPED AND UNDEVELOPED RESERVES
(after royalties)
NORTH AMERICA
Crude oil and natural gas liquids
(mmbbls)................................ 412 412 386 350
Natural gas (bcf)......................... 1 673 1 673 1 736 1 744
Total barrels of oil equivalent (mmboe)... 691 691 675 641
INTERNATIONAL(3)
Crude oil and natural gas liquids
(mbbls)................................. 245 245 7 2
Natural gas (bcf)......................... 466 466 -- --
Total barrels of oil equivalent (mmboe)... 323 323 7 2
PETROLEUM PRODUCT SALES
Gasoline (mcm/day)(5)......................... 25.1 24.3 25.9 25.9 24.6 24.3
Middle distillates (mcm/day)(6)............... 22.6 20.0 19.3 19.3 19.2 20.0
Other (mcm/day)(7)............................ 8.4 8.3 10.5 10.5 10.7 11.1
Total (mcm/day)............................... 56.1 52.6 55.7 55.7 54.5 55.4
</Table>
- ------------
Notes
(1) These volumes do not include natural gas produced for use in miscible flood
schemes or natural gas purchased from third parties for resale.
(2) Production from new projects and acquisitions has been averaged over the
full year, other than with respect to the information for the pro forma year
ended December 31, 2002.
(3) The oil and gas operations acquired from Veba in 2002 produced
173,500 mbbls/day of crude oil and natural gas liquids and 139 mmcf/day of
natural gas during 2001. The acquisition of these operations, as of May 2,
2002, resulted in the addition of proved developed and undeveloped reserves
(before royalties) of 323 mmbbls of crude oil and natural gas liquids and
573 bcf of natural gas.
(4) For 2002, virtually all of this production was acquired effective May 2,
2002.
(5) Includes motor and aviation gasolines.
(6) Includes diesel oils, heating oils and aviation jet fuels.
(7) Includes heavy fuel oils, asphalts, lubricants, liquefied petroleum gases,
petrochemical feedstocks and other petroleum products.
USE OF PROCEEDS
The net proceeds to us from this offering will be approximately
US $591.0 million, after deducting underwriting commissions, and after deducting
estimated expenses of the offering of US $1.2 million. All of the net proceeds
received by us from the sale of the Securities will be used to repay an
unsecured bank credit facility that we established to fund a portion of our
acquisition of most of the upstream oil and gas operations of Veba Oil &
Gas GmbH in 2002. The underwriters are affiliates of the lenders which provided
this credit facility. Refer to "Underwriting" in this prospectus supplement.
S-14
<Page>
CONSOLIDATED CAPITALIZATION
The following sets forth our consolidated capitalization as at
March 31, 2003:
- on an actual basis; and
- on an as adjusted basis to give effect to the issuance and sale of the
Securities and the application of the net proceeds, as described under
"Use of Proceeds".
The table should be read together with our unaudited consolidated interim
financial statements for the three months ended March 31, 2003, incorporated by
reference in this prospectus supplement and the accompanying prospectus. For the
purpose of the capitalization table, all US dollar amounts have been translated
into Canadian dollars based on the Bank of Canada noon rate on March 31, 2003.
<Table>
<Caption>
AS AT MARCH 31, 2003
-----------------------
ACTUAL AS ADJUSTED
--------- -----------
(UNAUDITED IN MILLIONS)
Long-term debt, including portions due within one year:
9.25% unsecured debentures due October 15, 2021........... $ 441 $ 441
7.875% unsecured debentures due June 15, 2026............. 404 404
7.00% unsecured debentures due November 15, 2028.......... 367 367
Capital leases............................................ 108 108
Acquisition credit facilities............................. 1 289 421
Securities offered hereby
2013 Notes.............................................. -- 441
2033 Notes.............................................. -- 441
------ ------
Total long-term debt.................................. $2 609 $2 623
------ ------
Shareholders' equity:
Common shares............................................. $1 286 $1 286
Contributed surplus....................................... 2 138 2 138
Retained earnings......................................... 2 938 2 938
Foreign currency translation adjustment................... 277 277
------ ------
Total shareholders' equity.............................. 6 639 6 639
------ ------
Total capitalization........................................ $9 248 $9 262
====== ======
</Table>
DESCRIPTION OF THE SECURITIES
The following description of the terms of the Securities (referred to in the
accompanying prospectus as the "debt securities") supplements and, to the extent
inconsistent therewith, replaces the description set forth under "Description of
Debt Securities" in the accompanying prospectus and should be read in
conjunction with such description. Capitalized terms used but not defined in
this section have the meanings given to them in the accompanying prospectus. In
this section only, "we", "us", "our", or "Petro-Canada" refers only to
Petro-Canada and not any of its subsidiaries or interests in partnerships or
other entities.
GENERAL
The 2013 Notes initially will be issued in an aggregate principal amount of
US $300,000,000 and will mature on July 15, 2013. The 2013 Notes will bear
interest at the rate of 4.00% per year. The 2033 Notes initially will be issued
in an aggregate principal amount of US $300,000,000 and will mature on July 15,
2033. The 2033 Notes will bear interest at a rate of 5.35% per year. Interest on
the Securities will be payable semi-annually on January 15 and July 15 of each
year, commencing January 15, 2004, to the persons in whose names the Securities
are registered at the close of business on the preceding January 1 or July 1,
respectively.
S-15
<Page>
The Securities will be our direct unsecured senior obligations and will rank
at least equally and ratably with all of our other unsecured senior indebtedness
from time to time outstanding. We conduct a substantial portion of our
operations through subsidiaries, partnerships and other entities. The Securities
will be effectively subordinated to all existing and future liabilities,
including trade payables and other indebtedness, of our subsidiaries,
partnerships and other entities through which we conduct our operations. At
May 31, 2003, our subsidiaries, partnerships and other entities through which we
conduct our operations had approximately $625 million of indebtedness and other
liabilities, comprised primarily of trade payables but excluding intercompany
indebtedness and guarantees.
Payment of the principal, premium, if any, and interest on the Securities
will be made in United States dollars. The Securities will not be entitled to
the benefit of any sinking fund.
The provisions of the Indenture relating to the payment of Additional
Amounts in respect of withholding taxes in certain circumstances (described
under the caption "Description of Debt Securities--Additional Amounts" in the
accompanying prospectus) and the provisions of the Indenture relating to the
redemption of Securities in the event of specified changes in withholding tax
law on or after the date of this prospectus supplement (described under the
caption "Description of Debt Securities--Tax Redemption" in the accompanying
prospectus) will apply to the Securities.
We may from time to time without notice to, or the consent of, the holders
of the Securities, create and issue additional 2013 Notes or 2033 Notes, or
both, under the Indenture. Such additional 2013 Notes and 2033 Notes will rank
equally and will have the same terms as the 2013 Notes or 2033 Notes, as the
case may be, offered hereby in all respects (except for the payment of interest
accruing prior to the issue date of the new 2013 Notes or 2033 Notes, as the
case may be, and except for the first payment of interest following the issue
date of the new 2013 Notes or 2033 Notes, as the case may be) so that such new
2013 Notes and 2033 Notes may be consolidated and form a single series with the
2013 Notes or 2033 Notes, as the case may be. In the event that additional
2013 Notes or 2033 Notes are issued, we will prepare a new prospectus
supplement.
We may issue debt securities and incur additional indebtedness other than
through the offering of Securities pursuant to this prospectus supplement.
OPTIONAL REDEMPTION
The Securities will be redeemable, in whole or in part, at our option at any
time at a redemption price equal to the greater of:
- 100% of the principal amount of the Securities to be redeemed, and
- as determined by the Quotation Agent (as defined below), the sum of the
present values of the remaining scheduled payments of principal and
interest on the Securities to be redeemed (not including any portion of
the payments of interest accrued as of the date of redemption), discounted
to the redemption date on a semi-annual basis (assuming a 360-day year
consisting of 12 30-day months) at the Adjusted Treasury Rate (as defined
below) plus 15 basis points and 20 basis points for the 2013 Notes and the
2033 Notes, respectively,
in either case, plus accrued interest thereon to the date of redemption.
Notice of any redemption will be mailed by first-class mail at least
30 days, but not more than 60 days, before the redemption date to each holder of
the Securities to be redeemed.
Unless we default in payment of the redemption price, on and after the
redemption date, interest will cease to accrue on the Securities or portions of
the Securities called for redemption.
"ADJUSTED TREASURY RATE" means, with respect to any redemption date, the
rate per year equal to the semi-annual equivalent yield to maturity or
interpolated (on a day count basis) of the Comparable Treasury Issue, applying a
price for the Comparable Treasury Issue (expressed as a percentage of its
principal amount) equal to the Comparable Treasury Price for the
redemption date.
S-16
<Page>
"COMPARABLE TREASURY ISSUE" means the United States Treasury security or
securities selected by the Quotation Agent as having an actual or interpolated
maturity comparable to the remaining term of the Securities to be redeemed that
would be utilized, at the time of selection and in accordance with customary
financial practice, in pricing new issues of corporate debt securities of
comparable maturity to the remaining term of the Securities.
"COMPARABLE TREASURY PRICE" means, with respect to any redemption date,
(A) the average of the Reference Treasury Dealer Quotations for such redemption
date, after excluding the highest and lowest such Reference Treasury Dealer
Quotations, or (B) if the Trustee obtains fewer than four such Reference
Treasury Dealer Quotations, the average of all such quotations.
"QUOTATION AGENT" means one of the Reference Treasury Dealers, which is
appointed by us.
"REFERENCE TREASURY DEALER" means (A) each of Deutsche Bank and RBC Capital
Markets or their affiliates which are primary U.S. Government securities dealers
and their respective successors; PROVIDED, HOWEVER, that if any of the foregoing
or their affiliates shall cease to be a primary U.S. Government securities
dealer in The City of New York (a "Primary Treasury Dealer"), we shall
substitute for it another Primary Treasury Dealer; and (B) any other Primary
Treasury Dealer selected by us.
"REFERENCE TREASURY DEALER QUOTATIONS" means, with respect to each Reference
Treasury Dealer and any redemption date, the average, as determined by the
Quotation Agent, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Quotation Agent by such Reference Treasury Dealer at 3:30 p.m.
(New York time) on the third business day preceding such redemption date.
BOOK-ENTRY SYSTEM
The Depository Trust Company (the "Depositary") will act as securities
depositary for the Securities. The Securities will be issued as fully registered
notes registered in the name of Cede & Co. (the Depositary's nominee) or such
other name as may be requested by an authorized representative of the
Depositary. One or more fully registered global notes ("Global Notes") will be
issued for each of the Securities, in the aggregate principal amount of the
issue, and will be deposited with the Depositary. The provisions set forth under
"Description of Debt Securities--Debt Securities in Global Form" in the
accompanying prospectus will be applicable to the Securities.
The following is based on information furnished by the Depositary:
The Depositary is a limited-purpose trust company organized under the
New York Banking Law, a "banking organization" within the meaning of the
New York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
clearing agency registered pursuant to the provisions of Section 17A of the
U.S. Securities Exchange Act of 1934. The Depositary also facilitates the
settlement among participants of notes transactions, such as transfers and
pledges, in deposited notes through electronic computerized book-entry charges
in participants' accounts, thereby eliminating the need for physical movement of
notes certificates. Direct participants ("direct participants") include:
- securities brokers and dealers;
- banks;
- trust companies;
- depositaries for Euroclear and Clearstream;
- clearing corporations; and
- certain other organizations.
The Depositary is owned by a number of its direct participants and by the
New York Stock Exchange, Inc., the American Stock Exchange, LLC, and the
National Association of Securities
S-17
<Page>
Dealers, Inc. Access to the Depositary's system is also available to others such
as brokers and dealers, banks and trust companies that clear through or maintain
a custodial relationship with a direct participant, either directly or
indirectly, in the case of "indirect participants". The rules applicable to the
Depositary and its direct and indirect participants are on file with the SEC.
Purchases of notes under the Depositary's system must be made by or through
direct participants, which will receive a credit for the notes on the
Depositary's records. The ownership interest of each "beneficial owner" is in
turn to be recorded on the direct and indirect participant's records. Beneficial
owners will not receive written confirmation from the Depositary of their
purchases but beneficial owners are expected to receive written confirmation
providing details of the transaction, as well as periodic statements of their
holdings, from the direct or indirect participants through which the beneficial
owners entered into the transaction. Transfers of ownership interests in the
Global Notes are to be accomplished by entries made on the books of participants
acting on behalf of beneficial owners. Beneficial owners will not receive
Securities in definitive form representing their ownership interests, except in
the event that use of the book-entry system for the Securities is discontinued
or upon the occurrence of certain other events described in the accompanying
prospectus. In particular, the Depositary may discontinue providing its services
as securities depositary with respect to the Securities at any time by giving
reasonable notice to us or the Trustee. Under these circumstances, and in the
event that a successor depositary is not obtained, Securities in definitive form
are required to be printed and delivered. We may decide to discontinue use of
the system of book-entry transfers through the Depositary (or a successor
depositary). In that event, Securities in definitive form will be printed and
delivered.
To facilitate subsequent transfers, the Global Notes which are deposited
with the Depositary are registered in the name of the Depositary's nominee,
Cede & Co., or such other name as may be requested by an authorized
representative of the Depositary. The deposit of the Global Notes with the
Depositary and its registration in the name of Cede & Co. or such other nominee
effect no change in beneficial ownership. The Depositary has no knowledge of the
actual beneficial owners of the Global Notes representing the Securities. The
Depositary's records reflect only the identity of the direct participants to
whose accounts the Securities are credited, which may or may not be the
beneficial owners. The participants will remain responsible for keeping account
of their holdings on behalf of their customers.
Conveyance of notices and other communications by the Depositary to direct
participants, by direct participants to indirect participants and by direct
participants and indirect participants to beneficial owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Neither the Depositary nor Cede & Co. (nor any other Depositary nominee)
will consent or vote with respect to the Global Notes representing the
Securities. Under its usual procedures, the Depositary mails an "omnibus proxy"
to us as soon as possible after the applicable record date. The omnibus proxy
assigns Cede & Co.'s consenting or voting rights to those direct participants to
whose accounts the notes are credited on the applicable record date (identified
in a listing attached to the omnibus proxy).
Payments of principal, premium, if any, and interest on the Securities will
be made to the Depositary, as the registered owner of the Global Notes. The
Depositary's practice is to credit direct participants' accounts on the
applicable payment date in accordance with their respective holdings shown on
the Depositary's records unless the Depositary has reason to believe that it
will not receive payment on that date. Payments by direct and indirect
participants to beneficial owners will be governed by standing instructions and
customary practices, as is the case with notes held for the account of customers
in bearer form or registered in "street name", and will be the responsibility of
the direct or indirect participant and not of the Depositary, the Trustee or us,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of principal, premium, if any, and interest to the
Depositary is our responsibility or the responsibility of the Trustee,
disbursement of these payments to direct participants shall be the
responsibility of the Depositary,
S-18
<Page>
and disbursement of these payments to the beneficial owners shall be the
responsibility of direct and indirect participants. Neither we nor the Trustee
will have any responsibility or liability for disbursements of payments in
respect of ownership interests in the Securities by the Depositary or the direct
or indirect participants or for maintaining or reviewing any records of the
Depositary or the direct or indirect participants relating to ownership
interests in the Securities or the disbursement of payments in respect of the
Securities.
The information in this section concerning the Depositary and the
Depositary's system has been obtained from sources that we believe to be
reliable, but is subject to any changes to the arrangements between us and the
Depositary and any changes to these procedures that may be instituted
unilaterally by the Depositary.
INTEREST COVERAGE
The following consolidated interest coverage ratios are calculated for the
12 month periods ended December 31, 2002 and March 31, 2003 based on audited, in
the case of December 31, 2002 and unaudited, in the case of March 31, 2003,
Canadian GAAP financial information. These coverage ratios give effect to the
issuance of all of our long-term debt and repayment or redemption thereof as of
that date and are adjusted to give effect to the issuance of the Securities and
the application of the net proceeds therefrom. For the purpose of the adjusted
interest coverage ratios, the Securities are assumed to be issued and the net
proceeds applied as of May 2, 2002, being the date of our acquisition of most of
the upstream oil and gas operations of Veba Oil & Gas GmbH.
<Table>
<Caption>
12 MONTHS ENDED YEAR ENDED
MARCH 31, 2003 DECEMBER 31, 2002
--------------------------- ---------------------------
ACTUAL AS ADJUSTED(3) ACTUAL AS ADJUSTED(3)
---------- -------------- ---------- --------------
Interest coverage on long-term debt:
Earnings(1)................................... 14.1 times 14.1 times 10.5 times 10.5 times
Cash Flow(2).................................. 21.4 times 21.4 times 17.9 times 17.8 times
</Table>
- ---------
Notes
(1) Interest coverage on long-term debt on an earnings basis is equal to net
earnings before interest expense and income taxes divided by interest
expense plus capitalized interest.
(2) Interest coverage on long-term debt on a cash flow basis is equal to cash
flow (which is expressed before changes in non-cash working capital) before
interest expense and current income taxes divided by interest expense plus
capitalized interest. We use cash flow to analyze our operating performance,
leverage and liquidity. Cash flow does not have any standardized meaning
prescribed by Canadian GAAP and therefore it may not be comparable with the
calculation of similar measures for other companies. Cash flow is not
intended to represent our operating cash flows or operating profits for the
period nor should it be viewed as an alternative to cash flow from operating
activities, net earnings or other measures of financial performance
calculated in accordance with Canadian GAAP.
(3) In anticipation of issuing the Securities, we entered into interest rate
derivatives, which result in an effective interest rate of 4.838% for the
2013 Notes and 6.073% for the 2033 Notes. These effective rates have not
been used in calculating the adjusted interest coverage.
Our interest expense requirements amounted to $209 million for the 12 month
period ended March 31, 2003. Our earnings before interest expense and income tax
for the 12 month period ended March 31, 2003 were $2 957 million.
Our interest coverage ratio on an earnings basis for the 12 month period
ended December 31, 2002 on a pro forma basis, as if the Veba acquisition had
occurred on January 1, 2002, is 10.4 times, and as adjusted to give effect to
the issuance of the Securities and the application of the net proceeds
therefrom, is 10.3 times.
S-19
<Page>
CREDIT RATINGS
Credit ratings are intended to provide investors with an independent measure
of the credit quality of any issue of securities. The following table discloses
the ratings of our unsecured long-term debt securities by the rating agencies
indicated:
<Table>
<Caption>
RATING AGENCY RATING
- ------------- --------
Moody's Investors Service, Inc. (Moody's)................... Baa2
Standard & Poor's Rating Services, a division of the
McGraw-Hill Companies, Inc. ("S&P")....................... BBB
Dominion Bond Rating Services ("DBRS")...................... A (low)
</Table>
Moody's credit ratings are on a long-term debt rating scale that ranges from
Aaa to C, which represents the range from highest to lowest quality of such
securities rated. According to the Moody's rating system, debt securities rated
"Baa" are considered as medium-grade obligations (i.e., they are neither highly
protected nor poorly secured). Interest payments and principal security appear
adequate for the present but certain protective elements may be lacking or may
be characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well.
Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through Caa in its corporate bond rating system. The
modifier 1 indicates that the issue ranks in the higher end of its generic
rating category, the modifier 2 indicates a mid-range ranking and the modifier 3
indicates that the issue ranks in the lower end of its generic rating category.
S&P's credit ratings are on a long-term debt rating scale that ranges from
AAA to D, which represents the range from highest to lowest quality of such
securities rated. According to the S&P rating system, an obligation rated "BBB"
exhibits adequate protection parameters. However, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity of the
obligor to meet its financial commitment on the obligation. The ratings from AA
to CCC may be modified by the addition of a plus (+) or minus (-) sign to show
relative standing within the major rating categories.
DBRS' credit ratings are on a long-term debt rating scale that ranges from
AAA to D which represents the range from highest to lowest quality of such
securities rated. According to the DBRS rating system, bonds and long-term debt
rated A are of satisfactory credit quality. Protection of interest and principal
is still substantial, but the degree of strength is less than with AA rated
entities. While a respectable rating, entities in the "A" category are
considered to be more susceptible to adverse economic conditions and have
greater cyclical tendencies than higher rated companies. The ratings from AA to
C may be modified by the addition of a "high" or "low" grade to indicate the
relative standing of a credit within a particular rating category.
The credit ratings accorded to the Securities by the rating agencies are not
recommendations to purchase, hold or sell the Securities inasmuch as such
ratings do not comment as to market price or suitability for a particular
investor. We cannot assure you that any rating will remain in effect for any
given period of time or that any rating will not be revised or withdrawn
entirely by a rating agency in the future if in its judgment circumstances so
warrant and, if any such rating is so revised or withdrawn, we are under no
obligation to update this prospectus supplement.
S-20
<Page>
CERTAIN INCOME TAX INFORMATION
THE FOLLOWING SUMMARY IS OF A GENERAL NATURE ONLY AND IS NOT INTENDED TO BE,
AND SHOULD NOT BE CONSTRUED TO BE, LEGAL OR TAX ADVICE TO ANY PROSPECTIVE
INVESTOR AND NO REPRESENTATION WITH RESPECT TO THE TAX CONSEQUENCES TO ANY
PARTICULAR INVESTOR IS MADE. ACCORDINGLY, PROSPECTIVE INVESTORS SHOULD CONSULT
WITH THEIR OWN TAX ADVISORS FOR ADVICE WITH RESPECT TO THE INCOME TAX
CONSEQUENCES TO THEM OF PURCHASING, HOLDING OR DISPOSING OF THE SECURITIES
HAVING REGARD TO THEIR OWN PARTICULAR CIRCUMSTANCES, INCLUDING ANY CONSEQUENCES
OF AN INVESTMENT IN THE SECURITIES ARISING UNDER STATE, PROVINCIAL OR LOCAL TAX
LAWS IN THE UNITED STATES OR CANADA OR TAX LAWS OF JURISDICTIONS OUTSIDE THE
UNITED STATES OR CANADA.
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Fraser Milner Casgrain LLP, our Canadian counsel, the
following is, as of the date hereof, a fair and adequate summary of the
principal Canadian federal income tax consequences to a purchaser of the
Securities who, for purposes of the INCOME TAX ACT (Canada) (the "Tax Act"),
deals with us at arm's length within the meaning of the Tax Act, and is neither
a resident of Canada nor deemed to be a resident of Canada (a "Non-Resident
Holder"). For purposes of the Tax Act, related persons (as defined in the
Tax Act) are deemed not to deal at arm's length and it is a question of fact
whether persons not related to each other deal at arm's length. This summary is
based on the current provisions of the Tax Act and the regulations thereunder,
counsel's understanding of the current published administrative practices of the
Canada Customs and Revenue Agency (the "CCRA"), and all specific proposals to
amend the Tax Act and the regulations announced by the Minister of Finance
(Canada) prior to the date hereof. This summary does not otherwise take into
account or anticipate changes in the law or in the administrative practices of
the CCRA, whether by judicial, governmental or legislative decision or action,
nor does it take into account tax legislation or considerations of any province
or territory of Canada or any jurisdiction outside Canada.
The payment by us of interest, premium, if any, or principal on the
Securities to a Non-Resident Holder will be exempt from Canadian non-resident
withholding tax under the Tax Act.
No other taxes on income (including capital gains) will be payable under the
Tax Act in respect of the holding, redemption or disposition of the Securities
or the receipt of interest, premium, if any, or principal thereon by
Non-Resident Holders who do not use or hold and are not deemed to use or hold
the Securities in carrying on business in Canada for the purposes of the
Tax Act, except that in certain circumstances Non-Resident Holders who are
non-resident insurers carrying on an insurance business in Canada and elsewhere
may be subject to such taxes.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following describes the material United States federal income tax
consequences that may be relevant to the purchase, ownership and disposition of
the Securities. Persons considering the purchase, ownership or disposition of
Securities should consult their tax advisors with regard to the application of
the United States, Canadian and other income tax laws to their particular
situations.
SCOPE OF DISCUSSION
This general discussion of certain United States federal income tax
consequences applies to you if you are a U.S. Holder (as defined below) and you
acquire the Securities at original issue for cash and hold the Securities as a
"capital asset" under Section 1221 of the Internal Revenue Code of 1986, as
amended (the "Code"). This summary does not consider any tax consequences
arising under United States federal gift and estate taxes or under the tax laws
of any state, local or foreign jurisdiction. In addition, it does not include
all of the rules which may affect the United States tax treatment of your
investment in the Securities. For example, special rules not discussed here may
apply to you if you are:
- a broker-dealer, a dealer in securities or currencies, or a financial
institution;
S-21
<Page>
- a pass-through entity (e.g., a partnership) or an investor who holds the
Securities through a pass-through entity (e.g., a partner in a
partnership);
- an insurance company;
- a tax-exempt organization;
- subject to the alternative minimum tax provisions of the Code;
- holding the Securities as part of a hedge, straddle or other risk
reduction or constructive sale transaction, conversion transaction or a
synthetic security or other integrated transaction;
- a U.S. Holder whose "functional currency" is not the U.S. dollar; or
- a holder who is not a U.S. Holder.
Furthermore, the discussion below is based upon the provisions of the Code
and United States Treasury regulations, rulings and judicial decisions under the
Code as of the date of this prospectus supplement, and those authorities may be
repealed, revoked or modified (possibly with retroactive effect) so as to result
in U.S. federal income tax consequences different from those discussed below.
There can be no assurance that the United States Internal Revenue Service
("IRS") will take a similar view as to any of the U.S. federal income tax
consequences described in this summary.
THIS SUMMARY MAY NOT COVER YOUR PARTICULAR CIRCUMSTANCES BECAUSE IT DOES NOT
CONSIDER FOREIGN, STATE OR LOCAL TAX RULES, DISREGARDS CERTAIN UNITED STATES
FEDERAL TAX RULES AND DOES NOT DESCRIBE FUTURE CHANGES IN UNITED STATES FEDERAL
TAX RULES. PLEASE CONSULT YOUR TAX ADVISOR RATHER THAN RELYING ON THIS GENERAL
DESCRIPTION.
UNITED STATES HOLDERS
If you are a "United States Holder", as defined below, this section applies
to you.
DEFINITION OF UNITED STATES HOLDER. You are a "United States Holder" if you
hold the Securities and you are:
- a citizen or resident of the United States;
- a corporation (or other entity taxable as a corporation) created or
organized in or under the laws of the United States or of any of its
political subdivisions;
- an estate, the income of which is subject to United States federal income
tax regardless of its source; or
- a trust, if a United States court is able to exercise primary supervision
over the administration of the trust and one or more United States persons
have the authority to control all substantial decisions of the trust, or
if the trust was in existence on August 20, 1996 and has properly elected
under applicable United States Treasury regulations to continue to be
treated as a United States person.
As used herein, a Non-U.S. Holder means a beneficial owner of a Security who
is not a United States Holder. If you are not a U.S. Holder, this discussion
does not apply to you.
PAYMENTS OF INTEREST. Interest received on the Securities is generally
taxable to you as ordinary interest income. You generally must pay
United States federal income tax on the interest on the Securities:
- when it accrues, if you use the accrual method of accounting for
United States federal income tax purposes; or
- when you receive it, if you use the cash method of accounting for
United States federal income tax purposes.
S-22
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SALE OR OTHER TAXABLE DISPOSITION OF THE SECURITIES. You must recognize a
gain or loss on the sale, exchange, redemption, repurchase, retirement or other
taxable disposition of a Security. The amount of your gain or loss equals the
difference between the amount you receive for the Security (in cash or other
property, valued at fair market value), minus the amount attributable to accrued
interest on the Security (which will be taxable as interest income if not
previously included in gross income), minus your adjusted tax basis in the
Security. Your initial tax basis in a Security equals the price you paid for the
Security.
Any such gain or loss on a taxable disposition of a Security as described in
the foregoing paragraph will generally constitute a capital gain or loss and
will be a long-term capital gain or loss if you held such Security for more than
one year. Under current law, net capital gains of non-corporate taxpayers under
certain circumstances are taxed at lower rates than items of ordinary income.
The deduction of capital losses is subject to certain limitations. If you are a
U.S. resident (as defined in Section 865 of the Code), any such gain or loss
will be treated as U.S. source gain or loss, unless it is attributable to an
office or other fixed place of business outside the United States and certain
other conditions are met.
INFORMATION REPORTING AND BACKUP WITHHOLDING. In general, information
reporting requirements will apply to payments of interest on, and the proceeds
of the sale or other disposition of, a Security to U.S. Holders other than
certain exempt recipients (including, among others, corporations and certain
tax-exempt organizations). In addition, if you are not an exempt recipient, you
may be subject to backup withholding tax, currently at a rate of 28%, with
respect to such payments. The backup withholding tax will not apply to you if
you provide your taxpayer identification number ("TIN") in the prescribed manner
unless:
- the TIN you provided is incorrect;
- you are notified by the IRS that you have failed to properly report
payments of interest and dividends; or
- in some circumstances, you fail to certify under penalties of perjury that
you have furnished a correct TIN and that you are not subject to backup
withholding.
If the backup withholding tax does apply to you, you may use the amounts
withheld as a refund or credit against your United States federal income tax
liability as long as you provide certain information to the IRS. A U.S. Holder
who does not provide a correct TIN may be subject to penalties imposed by
the IRS.
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UNDERWRITING
Deutsche Bank Securities Inc. is acting as sole bookrunning manager of the
offering, and Deutsche Bank Securities Inc. and RBC Dominion Securities
Corporation are acting as representatives of the underwriters named below.
Subject to the terms and conditions stated in the underwriting agreement
dated the date of this prospectus supplement, each underwriter named below has
agreed to purchase, and we have agreed to sell to that underwriter, the
principal amount of Securities set forth opposite the underwriter's name.
<Table>
<Caption>
PRINCIPAL AMOUNT OF PRINCIPAL AMOUNT OF
UNDERWRITER 2013 NOTES 2033 NOTES
- ----------- ------------------- -------------------
Deutsche Bank Securities Inc................................ US $97,500,000 US $97,500,000
RBC Dominion Securities Corporation......................... 86,490,000 86,490,000
Banc One Capital Markets, Inc............................... 16,500,000 16,500,000
Citigroup Global Markets Inc................................ 16,500,000 16,500,000
J.P. Morgan Securities Inc.................................. 16,500,000 16,500,000
BMO Nesbitt Burns Corp...................................... 14,752,500 14,752,500
CIBC World Markets Corp..................................... 14,752,500 14,752,500
Scotia Capital (USA) Inc.................................... 14,752,500 14,752,500
TD Securities (USA) Inc..................................... 14,752,500 14,752,500
BNP Paribas Securities Corp................................. 7,500,000 7,500,000
------------------ ------------------
Total..................................................... US $300,000,000 US $300,000,000
================== ==================
</Table>
The underwriting agreement provides that the obligations of the underwriters
to purchase the Securities included in this offering are subject to approval of
legal matters by counsel and to other conditions. The underwriters are obligated
to purchase all the Securities if they purchase any of the Securities.
The underwriters propose initially to offer some of the Securities directly
to the public at the public offering price set forth on the cover page of this
prospectus supplement and some of the Securities to certain dealers at the
public offering price less a concession not to exceed 0.40% and 0.50% of the
principal amount of the 2013 Notes and 2033 Notes, respectively. The
underwriters may allow, and other such dealers may reallow, a concession not in
excess of 0.25% and 0.25% of the principal amount of the 2013 Notes and
2033 Notes, respectively, on sales to certain other dealers. After the initial
offering of the Securities to the public, the representatives may change the
public offering price and concessions.
The following table shows the underwriting discounts and commissions that we
are to pay to the underwriters in connection with this offering (expressed as a
percentage of the principal amount of each of the 2013 Notes and 2033 Notes).
<Table>
<Caption>
PAID BY PETRO-CANADA
--------------------
Per 2013 Note............................................... 0.650%
Per 2033 Note............................................... 0.875%
</Table>
In connection with this offering, Deutsche Bank, on behalf of the
underwriters, may purchase and sell Securities in the open market. These
transactions may include over-allotment, syndicate coverings transactions and
stabilizing transactions. Over-allotment involves syndicate sales of the
Securities in excess of the principal amount of the Securities to be purchased
by the underwriters in this offering, which creates a syndicate short position.
Syndicate covering transactions involve purchases of the Securities in the open
market after the distribution has been completed in order to cover syndicate
short positions. Stabilizing transactions consist of certain bids or purchases
of the Securities made for the purpose of preventing or retarding a decline in
the market price of the Securities while the offering is in progress.
S-24
<Page>
The underwriters also may impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when
Deutsche Bank, in covering syndicate short positions or making stabilizing
purchases, repurchases Securities originally sold by that syndicate member.
Any of these activities may have the effect of preventing or retarding a
decline in the market price of the Securities. They may also cause the price of
the Securities to be higher than the price that otherwise would exist in the
open market in the absence of these transactions. The underwriters may conduct
these transactions in the over-the-counter market or otherwise. If the
underwriters commence any of these transactions, they may discontinue them at
any time.
The Securities are a new issue of securities with no established trading
market. The Securities will not be listed on any securities exchange or on any
automated dealer quotation system. The underwriters may make a market in the
Securities after completion of the offering, but will not be obligated to do so
and may discontinue any market-making activities at any time without notice. No
assurance can be given as to the liquidity of the trading market for the
Securities or that an active public market for the Securities will develop. If
an active public trading market for the Securities does not develop, the market
price and liquidity of the Securities may be adversely affected.
We estimate that our total expenses for this offering will be
US $1.2 million.
The underwriters have performed investment banking and advisory services for
us from time to time for which they have received customary fees and expenses.
The underwriters may, from time to time, engage in transactions with and perform
services for us in the ordinary course of their business. Certain of the
underwriters are affiliated with entities that are agents for and members of
syndicates of lenders which made available revolving and term facilities to us.
We are in compliance in all material respects with the terms of the agreements
governing such facilities.
Each of the underwriters is, directly or indirectly, a majority owned
subsidiary of a bank that is currently a lender to us (the "Lenders") and we may
be considered to be a connected issuer to each of the Lenders. We were indebted
to the Lenders for approximately $980 million as of May 31, 2003, under various
credit facilities, representing approximately 23% of our total indebtedness as
of that date. The net proceeds of the offering will be applied toward some of
this indebtedness. We are in compliance with the terms of such credit facilities
and none of the banks affiliated with the underwriters were involved in the
decision to offer the Securities or in the determination of the terms of the
distribution of the Securities. See "Use of Proceeds" and "Underwriting" in this
prospectus supplement.
As a consequence of the sale of the Securities, each of the underwriters
will receive a commission on the principal amount of Securities sold by it and
it is currently anticipated that the banks affiliated with certain of the
underwriters will receive more than 10% of the net proceeds from the sale of the
Securities as repayment of indebtedness. Because more than 10% of the proceeds
of this offering, not including underwriting compensation, will be received by
entities who are affiliated with National Association of Notes Dealers, Inc.
members who are participating in this offering, this offering is being made
pursuant to Rule 2710(c)(8) of the Conduct Rules of the National Association of
Securities Dealers, Inc. Pursuant to that rule, the appointment of a qualified
independent underwriter is not necessary in connection with this offering, as
the offering is of a class of securities rated Baa or better by Moody's rating
service or BBB or better by S&P's rating service.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the U.S. Securities Act of 1933, or to contribute to
payments the underwriters may be required to make because of any of those
liabilities.
We have been advised by Deutsche Bank that it may make the Securities
available for distribution on the Internet through a third-party system operated
by Market Axess Inc., an Internet-based communications technology provider. We
have also been advised by Deutsche Bank that Market Axess Inc. is providing the
system as a conduit for communications between Deutsche Bank and its customers
and is not a party to any transactions. We have also been advised by Deutsche
Bank that
S-25
<Page>
Market Axess Inc. is a registered broker-dealer and will receive compensation
from Deutsche Bank based on transactions conducted through the system. We have
been advised by Deutsche Bank that it will make the Securities available to its
customers through the Internet on the same terms as distributions of the
Securities made through other channels. Other than this prospectus supplement,
the accompanying prospectus and any registration statement of which they form a
part, each in electronic format as filed with the SEC, the information on any
Web site is not a part of this prospectus supplement, the accompanying
prospectus or any registration statement of which they form a part.
LEGAL MATTERS
Certain legal matters in connection with the issue of the Securities will be
passed upon for us by Fraser Milner Casgrain LLP, Calgary, Alberta, and by
Torys LLP, New York, New York, and certain legal matters in connection with the
issue of the Securities will be passed upon for the underwriters by Paul, Weiss,
Rifkind, Wharton & Garrison LLP. As to all matters of Canadian federal and
Alberta law, Torys LLP may rely upon the opinion of Fraser Milner Casgrain LLP.
As to all matters of U.S. federal and New York law, Fraser Milner Casgrain LLP
may rely upon the opinion of Torys LLP.
The partners and associates of Fraser Milner Casgrain LLP, Torys LLP and
Paul, Weiss, Rifkind, Wharton & Garrison LLP as a group beneficially own,
directly or indirectly, less than 1% of our outstanding securities.
EXPERTS
Our consolidated financial statements as at and for the fiscal year ended
December 31, 2002 incorporated by reference into the accompanying prospectus
have been audited by Deloitte & Touche LLP, independent auditors, as set forth
in their report (which report expresses an unqualified opinion on our 2002
consolidated financial statements and includes an explanatory paragraph
concerning the application of procedures relating to certain adjustments of
financial statement amounts related to the 2001 and 2000 consolidated financial
statements that were audited by other auditors who have ceased operations) which
is incorporated by reference in the accompanying prospectus and has been so
incorporated in reliance upon the report of such firm given their authority as
experts in auditing and accounting.
The consolidated financial statements for 3908968 Canada Inc. as at
December 31, 2002 and for the period May 2, 2002 to December 31, 2002 and the
consolidated statement of earnings and consolidated statement of cash flows of
Veba for the period January 1, 2002 to May 1, 2002 included in the accompanying
prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
set forth in their report included in the accompanying prospectus and has been
so included in reliance upon the report of such firm given their authority as
experts in auditing and accounting.
Our financial statements incorporated by reference into the accompanying
prospectus for the fiscal year ended December 31, 2001 have been audited by
Arthur Andersen LLP, as indicated in their report with respect thereto, and are
incorporated in the accompanying prospectus in reliance upon the authority of
said firm as experts in accounting and auditing in giving said reports. Because
Arthur Andersen LLP ceased to practice public accounting in Canada on June 3,
2002, we are not able to obtain the consent of Arthur Andersen LLP to the
incorporation of their report into the accompanying prospectus. As a result, you
will not be able to recover against Arthur Andersen LLP under Canadian or
United States securities laws for any untrue statements of material fact
contained in the financial statements audited by Arthur Andersen LLP or any
omissions to state a material fact required to be stated therein. Furthermore,
Arthur Andersen LLP may not possess sufficient assets to satisfy any claims that
may arise out of Arthur Andersen LLP's audit of our financial statements. Please
read "Where You Can Find More Information" and "Risk Factors--You will not be
able to recover damages from Arthur Andersen LLP with respect to their audit
report which is incorporated into this prospectus" in the accompanying
prospectus.
S-26
<Page>
BASE PROSPECTUS
[LOGO]
US $1,000,000,000
DEBT SECURITIES
We may from time to time offer for sale and issue debt securities in an
aggregate principal amount of up to US $1,000,000,000 (or the equivalent in any
other currency) during the 25 month period that this prospectus (including any
amendments to this prospectus) remains effective.
We will provide the specific terms of these securities and all information
omitted from this prospectus in supplements to this prospectus that will be
delivered to you together with this prospectus. You should read this prospectus
and the prospectus supplements carefully before you invest.
------------------------
NEITHER THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED
IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
------------------------
WE ARE PERMITTED, UNDER A MULTIJURISDICTIONAL DISCLOSURE SYSTEM ADOPTED BY THE
UNITED STATES AND CANADA TO PREPARE THIS PROSPECTUS IN ACCORDANCE WITH CANADIAN
DISCLOSURE REQUIREMENTS, WHICH ARE DIFFERENT FROM THOSE OF THE UNITED STATES. WE
PREPARE OUR FINANCIAL STATEMENTS IN ACCORDANCE WITH CANADIAN GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES, AND THEY ARE SUBJECT TO CANADIAN AUDITING AND AUDITOR
INDEPENDENCE STANDARDS. THEY MAY NOT BE COMPARABLE TO THE FINANCIAL STATEMENTS
OF U.S. COMPANIES.
YOU SHOULD BE AWARE THAT OWNING THESE SECURITIES MAY HAVE TAX CONSEQUENCES BOTH
IN THE UNITED STATES AND CANADA. THIS PROSPECTUS AND ANY APPLICABLE PROSPECTUS
SUPPLEMENT MAY NOT DESCRIBE THESE TAX CONSEQUENCES FULLY. YOU SHOULD READ THE
TAX DISCUSSION IN ANY APPLICABLE PROSPECTUS SUPPLEMENT.
YOUR ABILITY TO ENFORCE CIVIL LIABILITIES UNDER U.S. FEDERAL SECURITIES LAWS MAY
BE AFFECTED ADVERSELY BY THE FACT THAT WE ARE CONTINUED UNDER THE LAWS OF
CANADA, MOST OF OUR OFFICERS AND DIRECTORS AND MOST OF THE EXPERTS NAMED IN THIS
PROSPECTUS ARE RESIDENTS OF CANADA, AND ALL OR A SUBSTANTIAL PORTION OF OUR
ASSETS ARE LOCATED OUTSIDE THE UNITED STATES.
THESE DEBT SECURITIES HAVE NOT BEEN QUALIFIED FOR SALE UNDER THE SECURITIES LAWS
OF ANY PROVINCE OR TERRITORY OF CANADA AND ARE NOT BEING AND MAY NOT BE OFFERED
OR SOLD, DIRECTLY OR INDIRECTLY, IN CANADA OR TO ANY RESIDENT OF CANADA IN
CONTRAVENTION OF THE SECURITIES LAWS OF ANY PROVINCE OR TERRITORY OF CANADA.
THERE IS NO MARKET THROUGH WHICH THESE SECURITIES MAY BE SOLD AND PURCHASERS MAY
NOT BE ABLE TO RESELL SECURITIES PURCHASED UNDER THIS PROSPECTUS.
THIS PROSPECTUS INCLUDES (THROUGH INCORPORATION BY REFERENCE) FINANCIAL
STATEMENTS AUDITED BY ARTHUR ANDERSEN LLP FOR WHICH WE DID NOT OBTAIN THE
CONSENT OF ARTHUR ANDERSEN LLP TO THE USE OF ITS AUDIT REPORT. BECAUSE ARTHUR
ANDERSEN LLP HAS NOT PROVIDED ITS CONSENT, PURCHASERS OF THESE SECURITIES WILL
NOT HAVE THE STATUTORY RIGHT OF ACTION FOR DAMAGES AGAINST ARTHUR ANDERSEN LLP
PRESCRIBED BY APPLICABLE SECURITIES LEGISLATION. SEE "WHERE YOU CAN FIND MORE
INFORMATION", "RISK FACTORS" AND "EXPERTS".
------------------------
The date of this prospectus is May 14, 2003.
<Page>
TABLE OF CONTENTS
<Table>
<Caption>
PAGE NO.
--------
About this Prospectus....................................... 2
Where You Can Find More Information......................... 3
Forward Looking Statements.................................. 5
Petro-Canada................................................ 7
Use of Proceeds............................................. 9
Interest Coverage........................................... 9
Description of Debt Securities.............................. 10
Plan of Distribution........................................ 26
Certain Income Tax Considerations........................... 27
Risk Factors................................................ 27
Legal Matters............................................... 31
Experts..................................................... 31
Documents Filed as Part of the U.S. Registration
Statement................................................. 32
Index to Financial Statements............................... F-1
</Table>
ABOUT THIS PROSPECTUS
In this prospectus and in any prospectus supplement, unless otherwise
specified or the context otherwise requires, references to "Petro-Canada", the
"Corporation", "us", "we" or "our" mean Petro-Canada and its subsidiaries.
Unless otherwise specified, all dollar amounts contained in this prospectus and
in any prospectus supplement are expressed in Canadian dollars, and references
to "dollars", "Cdn$" or "$" are to Canadian dollars and all references to "US$"
are to United States dollars. All financial information included and
incorporated by reference in this prospectus or included in any prospectus
supplement is prepared using generally accepted accounting principles which are
in effect from time to time in Canada, which we refer to as "Canadian GAAP".
"U.S. GAAP" means generally accepted accounting principles which are in effect
from time to time in the United States.
This prospectus is part of a registration statement on Form F-9 relating to
the debt securities that we filed with the U.S. Securities and Exchange
Commission ("SEC"). Under the registration statement, we may, from time to time,
sell the debt securities described in this prospectus which may consist of
debentures, notes, other types of debt or any combination thereof, in one or
more offerings up to an aggregate principal amount of US $1,000,000,000. This
prospectus provides you with a general description of the debt securities that
we may offer. Each time we sell debt securities under the registration
statement, we will provide a prospectus supplement that will contain specific
information about the terms of that offering of debt securities. The prospectus
supplement may also add, update or change information contained in this
prospectus. Before you invest, you should read both this prospectus and any
applicable prospectus supplement together with additional information described
under the heading "Where You Can Find More Information". This prospectus does
not contain all of the information contained in the registration statement,
certain parts of which are omitted in accordance with the rules and regulations
of the SEC. You should refer to the registration statement and the exhibits to
the registration statement for further information with respect to us and the
debt securities.
We prepare our consolidated financial statements in accordance with Canadian
GAAP, which differs from U.S. GAAP. Therefore, our consolidated financial
statements included and incorporated by reference in this prospectus, in any
applicable prospectus supplement and in the documents incorporated by reference
in this prospectus may not be comparable to financial statements prepared in
accordance with U.S. GAAP. You should refer to Note 23 of our consolidated
financial statements for the year ended December 31, 2002 for a discussion of
the principal differences between our financial results calculated under
Canadian GAAP and under U.S. GAAP.
2
<Page>
In this prospectus, natural gas volumes are converted to barrels of oil
equivalent using the ratio of six thousand cubic feet of natural gas to one
barrel of oil. Natural gas volumes are stated at the official temperature and
pressure bases of the areas in which the reserves are located.
WHERE YOU CAN FIND MORE INFORMATION
INFORMATION HAS BEEN INCORPORATED BY REFERENCE IN THIS PROSPECTUS FROM
DOCUMENTS FILED WITH SECURITIES COMMISSIONS OR SIMILAR AUTHORITIES IN CANADA.
Copies of the documents incorporated in this prospectus herein by reference may
be obtained on request without charge from our Corporate Secretary at:
Petro-Canada
P.O. Box 2844
150 - 6th Avenue S.W.
Calgary, Alberta T2P 3E3
(403) 269-8000
Attention: Corporate Secretary
You may also access our disclosure documents and any reports, statements or
other information that we file with the Canadian provincial securities
commissions or other similar regulatory authorities through the Internet on the
Canadian System for Electronic Document Analysis and Retrieval, which is
commonly known by the acronym SEDAR and which may be accessed at www.sedar.com.
SEDAR is the Canadian equivalent of the SEC's Electronic Document Gathering and
Retrieval System, which is commonly known by the acronym EDGAR and which may be
accessed at www.sec.gov.
In addition to our continuous disclosure obligations under the securities
laws of the provinces of Canada, we are subject to the information requirements
of the U.S. Securities Exchange Act of 1934 and, in accordance with the Exchange
Act, file reports and other information with the SEC. Under a
multijurisdictional disclosure system adopted by the United States and Canada,
these reports and other information (including financial information) may be
prepared in accordance with the disclosure requirements of Canada, which are
different from those of the United States. You may read any document we file
with or furnish to the SEC at the SEC's public reference rooms at Room 1024,
450 Fifth Street N.W., Washington, D.C. 20549, at 233 Broadway, New York,
New York, 10279 and at 500 West Meridian Street, Suite 1400, Chicago, Illinois
60661. You may also obtain copies of the same documents from the public
reference room of the SEC at 450 Fifth Street, N.W., Washington D.C. 20549 by
paying a fee. Please call the SEC at 1-800-SEC-0330 or access its website at
www.sec.gov for further information on the public reference rooms. Our filings
since November 4, 2002 are also electronically available from the SEC's EDGAR,
as well as from commercial document retrieval services.
You are invited to read and copy any reports, statements or other
information that we file with the Canadian provincial securities commissions or
other similar regulatory authorities at their respective public reference rooms.
Reports and other information about us should also be available for inspection
at the offices of the Toronto Stock Exchange and the New York Stock Exchange.
Under the multijurisdictional disclosure system adopted by the
United States and Canada, we are permitted to incorporate by reference in this
prospectus certain information we file with the SEC and the Alberta Securities
Commission (the "ASC"), a commission of authority in the Province of Alberta,
Canada, similar to the SEC, which means that we can disclose important
information to you by referring you to those documents. Information that is
incorporated by reference is an important part of this prospectus. Information
incorporated by reference must be filed as exhibits to the registration
statement on Form F-9 that we have filed with the SEC in connection with the
debt securities. We
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incorporate by reference the documents listed below, which were filed with the
ASC and with the SEC:
- our management proxy circular dated March 6, 2003, excluding the
information contained therein under the headings "Executive
Compensation--Report on Executive Compensation" and "Executive
Compensation--Performance Graph";
- our annual information form dated March 6, 2003, including the information
incorporated therein under the heading "Management's Discussion and
Analysis";
- our audited consolidated financial statements as at and for the years
ended December 31, 2002, 2001 and 2000, together with the notes thereto
and the reports of the auditors thereon;
- our unaudited interim consolidated financial statements as at March 31,
2003 and for the three months ended March 31, 2003 and March 31, 2002;
- the information contained under the heading "Management's Discussion and
Analysis" contained in our Quarterly Report to Shareholders for the three
months ended March 31, 2003; and
- our material change report dated March 20, 2003 with respect to the
retirement of Norman F. McIntyre as President in 2004.
Any documents of the type referred to in the preceding paragraph, or similar
material, including all annual information forms, all information circulars, all
financial statements, all material change reports (excluding confidential
reports, if any), all updated interest coverage ratio information, as well as
all prospectus supplements disclosing additional or updated information, filed
by us with securities commissions or similar authorities in the relevant
provinces of Canada subsequent to the date of this prospectus and prior to
25 months from the date hereof shall be deemed to be incorporated by reference
into this prospectus. To the extent that any document or information
incorporated by reference into this prospectus is included in a report that is
filed with or furnished to the SEC on Form 40-F, 20-F, 10-K, 10-Q, 8-K or 6-K
(or any respective successor form), such document or information shall also be
deemed to be incorporated by reference as an exhibit to the registration
statement of which this prospectus forms a part.
Upon a new annual information form and related annual financial statements
being filed by us with and, where required, accepted by, the applicable
securities regulatory authorities during the currency of this prospectus, the
previous annual information form, annual financial statements and all interim
financial statements, material change reports and management proxy circulars
filed prior to the commencement of the then current fiscal year will be deemed
no longer to be incorporated into this prospectus for purposes of future offers
and sales of debt securities under this prospectus.
THIS PROSPECTUS INCORPORATES BY REFERENCE FINANCIAL STATEMENTS AUDITED BY
ARTHUR ANDERSEN LLP FOR WHICH WE DID NOT OBTAIN THE CONSENT OF ARTHUR
ANDERSEN LLP TO THE USE OF ITS AUDIT REPORT. ARTHUR ANDERSEN LLP'S CONSENT WAS
NOT OBTAINED BECAUSE, ON JUNE 3, 2002, ARTHUR ANDERSEN LLP CEASED TO PRACTICE
PUBLIC ACCOUNTING IN CANADA. BECAUSE ARTHUR ANDERSEN LLP HAS NOT PROVIDED ITS
CONSENT, PURCHASERS OF DEBT SECURITIES UNDER THIS PROSPECTUS WILL NOT HAVE THE
STATUTORY RIGHT OF ACTION FOR DAMAGES AGAINST ARTHUR ANDERSEN LLP PRESCRIBED BY
APPLICABLE SECURITIES LEGISLATION. ARTHUR ANDERSEN LLP MAY NOT HAVE SUFFICIENT
ASSETS AVAILABLE TO SATISFY JUDGMENTS AGAINST IT. PLEASE READ "RISK FACTORS--YOU
WILL NOT BE ABLE TO RECOVER DAMAGES FROM ARTHUR ANDERSEN LLP WITH RESPECT TO
THEIR AUDIT REPORT WHICH IS INCORPORATED INTO THIS PROSPECTUS".
A prospectus supplement containing the specific variable terms of an
offering of debt securities will be delivered to purchasers of the applicable
debt securities together with this prospectus and will be deemed to be
incorporated by reference into this prospectus as of the date of such prospectus
supplement but only for the purposes of the offering of the debt securities
covered by that prospectus supplement.
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ANY STATEMENT CONTAINED IN THIS PROSPECTUS OR IN A DOCUMENT INCORPORATED OR
DEEMED TO BE INCORPORATED BY REFERENCE IN THIS PROSPECTUS SHALL BE DEEMED TO BE
MODIFIED OR SUPERSEDED FOR PURPOSES OF THIS PROSPECTUS TO THE EXTENT THAT A
STATEMENT CONTAINED IN THIS PROSPECTUS OR IN ANY OTHER SUBSEQUENTLY FILED
DOCUMENT WHICH ALSO IS OR IS DEEMED TO BE INCORPORATED BY REFERENCE IN THIS
PROSPECTUS MODIFIES OR SUPERSEDES SUCH PRIOR STATEMENT. ANY STATEMENT OR
DOCUMENT SO MODIFIED OR SUPERSEDED SHALL NOT, EXCEPT TO THE EXTENT SO MODIFIED
OR SUPERSEDED, BE INCORPORATED BY REFERENCE AND CONSTITUTE A PART OF
THIS PROSPECTUS.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS OR ANY APPLICABLE PROSPECTUS SUPPLEMENT AND ON THE
OTHER INFORMATION INCLUDED IN THE REGISTRATION STATEMENT OF WHICH THIS
PROSPECTUS FORMS A PART. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT OR ADDITIONAL INFORMATION. WE ARE NOT MAKING AN OFFER OF THESE DEBT
SECURITIES IN ANY JURISDICTION WHERE THE OFFER IS NOT PERMITTED BY LAW. YOU
SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS OR ANY APPLICABLE PROSPECTUS SUPPLEMENT IS ACCURATE AS OF ANY
DATE OTHER THAN THE DATE ON THE FRONT OF THE APPLICABLE PROSPECTUS SUPPLEMENT.
FORWARD LOOKING STATEMENTS
This prospectus contains or incorporates by reference forward-looking
statements. All statements other than statements of historical fact included or
incorporated by reference in this prospectus and that address activities, events
or developments that we expect or anticipate may or will occur in the future are
forward-looking statements. Forward-looking statements contained or incorporated
by reference in this prospectus include, but are not limited to, references to:
- future capital and other expenditures (including the amount, nature and
sources of funding thereof);
- oil and gas production levels and the sources of their growth;
- tax and royalty rates;
- oil and gas prices;
- the Canadian dollar exchange rate with United States dollars and other
foreign currencies;
- interest rates;
- refining and marketing margins;
- demand for refined petroleum products;
- planned facilities construction and expansion;
- retail site throughputs;
- pre-production and operating costs;
- reserve estimates;
- reserve life;
- natural gas export capacity;
- plans for and results of exploration and development activities;
- environmental matters;
- drilling plans;
- acquisition and disposition of resource properties; and
- the dates by which certain areas and facilities will be developed or will
come on stream.
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Undue reliance should not be placed on these forward-looking statements,
which are based upon our assumptions and are subject to known and unknown risks
and uncertainties and other factors which may cause actual results, levels of
activity and achievements to differ materially from those estimated or projected
and expressed in or implied by such statements. Such factors include, but are
not limited to:
- general economic, market and business conditions;
- industry capacity;
- competitive action by other companies;
- fluctuations in oil and gas prices;
- refining and marketing margins;
- the ability to produce and transport crude oil and natural gas to markets;
- the results of exploration and development drilling and related
activities;
- fluctuation in foreign currency exchange rates and interest rates;
- the ability of suppliers to meet commitments;
- actions by governmental authorities including increases in taxes;
- political or geopolitical changes;
- decisions or approvals of administrative tribunals;
- changes in environmental and other regulations;
- the availability of capital markets;
- risks attendant with oil and gas operations; and
- other factors, many of which are beyond our control.
These and additional factors are described in more detail in our
management's discussion and analysis of financial condition and results of
operations in our annual information form dated March 6, 2003, filed with the
securities commissions or similar authorities in the provinces of Canada and
incorporated by reference in this prospectus. We undertake no obligation to
update publicly or revise any forward-looking statements contained in this
prospectus, and such statements are expressly qualified by this cautionary
statement. You should also carefully consider the matters discussed under "Risk
Factors" in this prospectus.
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PETRO-CANADA
OVERVIEW
We are an integrated oil and gas company, a leader in the Canadian petroleum
industry, with a portfolio of businesses spanning both the upstream and
downstream sectors of the industry. In the upstream sector, we explore for,
develop, produce and market crude oil and natural gas in Canada and
internationally. Our downstream sector refines crude oil and other feedstocks
and markets and distributes petroleum products and related goods and services,
primarily in Canada but with some international marketing, especially for
lubricants. We operate the following core businesses: East Coast Oil, Oil Sands,
North American Natural Gas, International and Downstream.
We are organized under the CANADA BUSINESS CORPORATIONS ACT. Our common
shares are listed on the Toronto Stock Exchange under the trading symbol "PCA"
and on the New York Stock Exchange under the trading symbol "PCZ". Our
registered and principal executive office is located at
150 - 6th Avenue S.W., Calgary, Alberta, Canada T2P 3E3. Telephone:
(403) 296-8000.
EAST COAST OIL
Our East Coast Oil holdings are located principally on the Grand Banks
(offshore Newfoundland, Canada). They include a 20 percent interest in the
producing Hibernia oil field; operatorship and a 34 percent interest in the
producing Terra Nova oil field; and a 27.5 percent interest in the White Rose
oil field, which is under development. In 2002, our share of crude oil
production from our combined interests at Hibernia and Terra Nova averaged
approximately 71,900 barrels per day. Development of the White Rose oil field,
which began in 2002, includes construction of a floating, production, storage
and offloading vessel with a production capacity of 100,000 barrels of oil per
day. We expect first oil from White Rose by the end of 2005. Our East Coast
strategy also includes expanding our production base through field extensions at
Hibernia and Terra Nova. Additionally, we have interests in other significant
discovery areas on the Grand Banks, and have identified a number of deep-water
exploration prospects in this offshore region.
OIL SANDS
Our major Oil Sands interests include a 12 percent participation in the
Syncrude joint venture and 100 percent ownership of the recently completed
MacKay River IN SITU bitumen development, both located in northeastern Alberta,
Canada. In 2002, our share of synthetic crude oil production from Syncrude
averaged 27,500 barrels per day. MacKay River bitumen production, which came on
stream in November 2002, averaged 9,400 barrels per day in December 2002 and is
scheduled to ramp up to its 30,000 barrel per day capacity by year-end 2003.
Bitumen is recovered IN SITU where oil sands are too deep to be mined
economically and the bitumen is too thick to flow to the surface through
conventional production methods. Our bitumen extraction process utilizes
steam-assisted gravity drainage, which is commonly known by the acronym SAGD.
SAGD combines horizontal drilling with thermal steam injection.
We also hold interests in about 300,000 net acres of oil sands leases
considered prospective for IN SITU development.
Our Oil Sands strategy includes participation in successive phases of
Syncrude's long-term expansion plans and our own staged development of IN SITU
bitumen production and integration with processing at our refinery in Edmonton,
Alberta. The regulatory process is under way for our second IN SITU development
at Meadow Creek, Alberta, and approval has been received for a refinery
conversion at Edmonton to enable processing of bitumen. A final decision on
whether or not to proceed with the conversion of the Edmonton refinery remains
pending and we are evaluating possible changes to the project's scope, staging
and technology.
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NORTH AMERICAN NATURAL GAS
Our North American Natural Gas business is one of the largest producers of
natural gas in western Canada. For longer-term growth, we are exploring in the
Mackenzie Delta (Northwest Territories, Canada), the Scotian Slope (offshore
Nova Scotia, Canada) and Alaska. In 2002, our natural gas production in western
Canada averaged 722 million cubic feet per day. Our strategy in western Canada
is to continue pursuing attractive prospects in the Western Canada Sedimentary
Basin while focusing on profitability rather than volume. Exploration in the
Mackenzie Delta has been rewarded with the successful Tuk M-18 well.
INTERNATIONAL
On May 2, 2002, we acquired most of the upstream oil and gas assets of Veba
Oil & Gas GmbH, a European-based exploration and production company. On
December 10, 2002, we acquired one of Veba's remaining operations in Venezuela
which had been subject to a right of first refusal. The acquisition cost
totalled $2.234 billion. The Veba acquisition established our international
operations as a fifth core business with operations focused on three regions:
Northwest Europe, North Africa/ Near East and Northern Latin America.
Integration of the oil and gas assets acquired from Veba was substantially
completed prior to 2002 year end. From May 2 to December 31, 2002, our share of
production from the acquired Veba assets averaged 210,000 barrels of oil
equivalent per day.
Our strategy for the International business unit is exploitation of the
existing reserve base and pursuit of new exploration and development
opportunities leveraging off existing relationships, skills and infrastructure.
Our goal is to establish a significant portfolio of growth opportunities, well
balanced as to technical risk and economic return, using the current business
and assets as a platform for growth.
In Northwest Europe, our production comes from the United Kingdom and
Netherlands sectors of the North Sea, with exploration programs extending into
Denmark and the Faroe Islands. In the UK sector, our operations are centred
around existing infrastructure, principally the Scott platform in the Outer
Moray Firth and the Triton floating, production, storage and offloading vessel,
located further south in the central North Sea, 190 kilometres east
of Aberdeen.
Our North Africa/Near East region, which provides the major portion of our
international crude oil production, combines our interests in Syria, Libya,
Kazakhstan, Algeria and Tunisia. In Syria, our interests are consolidated under
the umbrella of a joint venture firm, Al Furat Petroleum Company, which produces
about 55 per cent of Syrian production. In Libya, where we are one of the
largest producers, our major holding is a 49 per cent interest in a joint
venture with the National Oil Corporation of Libya, which combines the
operations of 22 fields.
In Northern Latin America, our operations are focused on Trinidad and
Venezuela. In Trinidad we hold a 17 per cent working interest in the North Coast
Marine Area--1 natural gas project in partnership with the operator, British
Gas. In Venezuela, we hold a 50 per cent interest in the La Ceiba block. A right
of first refusal concerning Veba's heavy oil interests at Cerro Negro in
Venezuela has not yet been resolved.
DOWNSTREAM
In our Downstream core business, we transport, refine, market and distribute
petroleum products and related goods and services.
We own and operate three refineries, strategically located in Canada's major
markets, in Montreal, Quebec; Oakville, Ontario; and Edmonton, Alberta. With a
total rated capacity of 49,800 cubic metres (or 313,000 barrels) per day, these
refineries represent the second largest refining capacity in Canada with
17 per cent of the Canadian refining industry's total operating capacity. Our
refineries produce a full range of refined petroleum products, including
gasolines, diesel oils, heating oils, aviation fuels,
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heavy fuel oils, asphalts, petrochemicals and feedstocks for lubricants. A
nation-wide marketing network serves retail, wholesale and industrial customers
across Canada, with a 17 per cent share of the national refined products market.
Our lubricants centre, in Mississauga, Ontario, produces specialty lubricants
and waxes that we market in Canada and internationally. We are the largest
producer of lubricant base stocks in Canada and the largest producer of high
quality white oils in the world.
Our Downstream strategy is to generate superior returns by focusing on
first-quartile refining performance, advancing Petro-Canada as the brand of
choice for Canadian gasoline consumers, and increasing sales of high-margin
specialty lubricants.
USE OF PROCEEDS
Unless otherwise indicated in a prospectus supplement relating to a series
of debt securities, we will use the net proceeds we receive from the sale of the
debt securities for general corporate purposes relating to our operations in
North America, South America and Europe, which may include financing our capital
expenditure program and working capital requirements. We may also use such
proceeds for the repayment of debt and the financing of acquisitions. The amount
of net proceeds to be used for any such purpose will be provided in the
applicable prospectus supplement. We may invest funds that we do not immediately
require in short-term marketable securities. We may, from time to time, issue
debt instruments and incur additional debt other than through the issuance of
debt securities under this prospectus.
INTEREST COVERAGE
The following consolidated financial ratios are calculated for the twelve
month periods ended December 31, 2002 and March 31, 2003 based on audited, in
the case of December 31, 2002 and unaudited, in the case of March 31, 2003,
financial information. These coverage ratios do not give effect to the issuance
of securities that may be issued pursuant to this prospectus and any prospectus
supplement, since the aggregate principal amounts and the terms of such
securities are not known at present. The interest coverage ratios set forth
below do not purport to be indicative of interest coverage ratios for any future
periods. The ratios have been calculated based on Canadian GAAP.
<Table>
<Caption>
TWELVE MONTHS ENDED
--------------------------------------
MARCH 31, 2003 DECEMBER 31, 2002
----------------- ------------------
ACTUAL ACTUAL
----------------- ------------------
Interest coverage on long-term debt:
Earnings(1)................................................. 14.1 times 10.5 times
Cash Flow(2)................................................ 21.4 times 17.9 times
</Table>
- ---------
Notes:
(1) Interest coverage on long-term debt on an earnings basis is equal to net
earnings before interest expense and income taxes divided by interest
expense plus capitalized interest.
(2) Interest coverage on long-term debt on a cash flow basis is equal to cash
flow before interest expense and current income taxes divided by interest
expense plus capitalized interest. Our management uses cash flow (before
changes in non-cash working capital) to analyze our operating performance,
leverage and liquidity. Cash flow (before changes in non-cash working
capital) does not have any standardized meaning prescribed by Canadian GAAP
and therefore it may not be comparable with the calculation of similar
measures for other companies. Cash flow (before changes in non-cash working
capital) is not intended to represent our operating cash flows or operating
profits for the period nor should it be viewed as an alternative to cash
flow from operating activities, net earnings or other measures of financial
performance calculated in accordance with Canadian GAAP.
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Our interest expense requirements amounted to $209 million for the
twelve-month period ended March 31, 2003. Our earnings before interest expense
and income taxes for the twelve-month period ended March 31, 2003 were
$2 957 million. Our earnings coverage ratio for the twelve-month period ended
December 31, 2002 on a pro forma basis, as if the Veba acquisition had occurred
on January 1, 2002, is 10.4.
If we offer debt securities having a term to maturity in excess of one year
under this prospectus and a prospectus supplement, the prospectus supplement
will include interest coverage ratios giving effect to the issuance of
such securities.
DESCRIPTION OF DEBT SECURITIES
In this section, "we", "us", "our" or "Petro-Canada" refers only to
Petro-Canada and not any of its subsidiaries or interests in partnerships and
other entities. In what follows, we describe certain general terms and
provisions of the debt securities. We will provide the particular terms and
provisions of a series of debt securities and a description of how the general
terms and provisions described below apply to that series in a prospectus
supplement. Accordingly, for a description of the terms of a particular series
of debt securities, you must refer to both the applicable prospectus supplement
relating to the series and the description of the debt securities set forth in
this prospectus.
The debt securities will be issued under an indenture (the "Indenture") to
be entered into between us and The Bank of New York, as trustee (the "Trustee").
The Indenture will be subject to and governed by the U.S. Trust Indenture Act of
1939, as amended. A copy of the form of Indenture has been filed with the SEC as
an exhibit to the registration statement of which this prospectus is a part.
The following is a summary of the Indenture which sets forth certain general
terms and provisions of the debt securities and is not intended to be complete.
For a more complete description, including the definition of capitalized terms
used but not defined in this summary, you should refer to the Indenture.
Whenever we refer in this summary to particular provisions of the Indenture,
those provisions are qualified in their entirety by reference to the Indenture.
It is the Indenture, and not this summary, that governs the rights of holders of
debt securities.
We may issue debt securities and incur additional indebtedness other than
through an offering of debt securities under this prospectus.
GENERAL
The Indenture does not limit the aggregate principal amount of debt
securities (which may include debentures, notes and other evidences of
indebtedness) that we may issue under the Indenture and does not limit the
amount of other indebtedness we may incur. The Indenture provides that debt
securities may be issued from time to time in one or more series and may be
denominated and payable in U.S. dollars or any other currency. Unless otherwise
indicated in an applicable prospectus supplement, the debt securities will be
unsecured obligations. The debt securities offered pursuant to this prospectus
will be issued in an aggregate principal amount of up to US $1 billion or the
equivalent in a foreign currency. The Indenture also permits us to increase the
principal amount of any series of the debt securities previously issued and to
issue that increased principal amount.
The applicable prospectus supplement will describe the specific terms of the
debt securities of a series of debt securities being offered and may include,
but is not limited to, any of the following:
- the title and the aggregate principal amount of the debt securities;
- any limit on the aggregate principal amount of the debt securities of
such series;
- the date or dates, or the method by which such date or dates will be
determined or extended, on which the principal of, and premium, if any, on
the debt securities will be payable and the portion (if less than the
principal amount) to be payable upon a declaration of acceleration
of maturity;
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- the rate or rates (whether fixed or variable) at which the debt securities
will bear interest, if any, or the method by which such rate or rates will
be determined and the date or dates from which such interest will accrue
and on which such interest will be payable and the regular record date or
dates for the payment of interest on the debt securities in registered
form, or the method by which such date or dates will be determined;
- the place or places where the principal of, and premium, if any, and
interest, if any, on the debt securities will be payable and each office
or agency where the debt securities may be presented for registration of
transfer or exchange;
- the period or periods within which, the price or prices at which, the
currency in which, and other terms and conditions upon which the debt
securities may be redeemed or purchased, in whole or in part, by us;
- the terms and conditions upon which you may redeem the debt securities
prior to maturity and the price or prices at which and the currency in
which the debt securities are payable;
- the terms, if any, on which the debt securities may be converted or
exchanged for other of our debt securities or debt securities of
other entities;
- if payment of the debt securities will be guaranteed by any other person;
- the extent and manner, if any, in which payment on or in respect of the
debt securities will be secured, or will rank senior, or will be
subordinated to the prior payment of our other liabilities
and obligations;
- if the series of debt securities will be issuable in the form of one or
more global securities and, if so, the identity of the depository for the
global securities;
- any applicable Canadian and U.S. federal income tax consequences;
- the terms and conditions of any sinking fund or analogous provisions;
- if the debt securities may be issued bearing no interest or at a discount
below their stated principal amount, and special considerations applicable
to any such discounted debt securities or other debt securities offered
and sold at par which are treated as having been issued at a discount for
Canadian and/or U.S. federal income tax purposes;
- if the debt securities are to be registered securities, bearer securities
(with or without coupons) or both;
- if other than denominations of US $1,000 and any integral multiple
thereof, the denomination or denominations in which any definitive
securities of the series shall be issuable and, if other than the
denomination of US $1,000, the denomination or denominations in which any
bearer debt securities of the series shall be issuable;
- if other than U.S. dollars, the currency or currency unit in which the
debt securities are denominated or in which currency payment of the
principal of, and premium, if any, or interest, if any, on such debt
securities will be payable;
- any index formula or other method used to determine the amount of payments
of principal of, and premium, if any, or interest, if any, on the
debt securities;
- whether and under what circumstances we will be required to pay any
Additional Amounts (defined below under "Additional Amounts") for
withholding or deduction for Canadian taxes with respect to the debt
securities, and whether we will have the option to redeem the debt
securities rather than pay the Additional Amounts; and
- any other terms, conditions, rights and preferences (or limitations on
such rights and preferences) of the debt securities including covenants
and events of default which apply solely to a particular series of the
debt securities being offered which do not apply generally to other debt
securities, or any covenants or events of default generally applicable to
the debt securities which do not apply to a particular series of the
debt securities.
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Unless otherwise indicated in a prospectus supplement, the Indenture does
not afford holders of the debt securities the right to tender such debt
securities to us for repurchase in the event we have a change in control.
RANKING AND OTHER INDEBTEDNESS
Unless otherwise indicated in any applicable prospectus supplement, the debt
securities will be our unsecured senior obligations and will rank equally and
ratably with all of our other unsecured senior indebtedness from time to time
outstanding. Unless otherwise indicated in any applicable prospectus supplement,
the debt securities will be subordinated to all existing and future liabilities,
including trade payables and other indebtedness, of our subsidiaries,
partnerships and other entities. We will specify in a prospectus supplement at
the time we issue a series of debt securities the amount of our subsidiaries and
partnerships then existing liabilities, including trade payables and other
indebtedness.
DEBT SECURITIES IN GLOBAL FORM
Unless otherwise indicated in a prospectus supplement, a series of the debt
securities will be issued in global form as one or more "global securities" and
will be registered in the name of and be deposited with a depositary, or its
nominee, each of which will be identified in the prospectus supplement relating
to that series. Unless and until exchanged, in whole or in part, for debt
securities in definitive form, a global security may not be transferred except
as a whole by the depositary for such global security to a nominee of the
depositary, by a nominee of the depositary to the depositary or another nominee
of the depositary or by the depositary or any such nominee to a successor of the
depositary or a nominee of the successor.
The specific terms of the depositary arrangement with respect to any series
or portion of a series of the debt securities to be represented by a global
security will be described in the prospectus supplement relating to such series.
We anticipate that the following provisions will apply to all depositary
arrangements.
Upon the issuance of a global security, the depositary therefor or its
nominee will credit, on its book entry and registration system, the respective
principal amounts of the debt securities represented by the global security to
the accounts of such persons, designated as "participants", having accounts with
such depositary or its nominee. Such accounts shall be designated by the
underwriters, dealers or agents participating in the distribution of the debt
securities or by us if such debt securities are offered or sold directly by us.
Ownership of beneficial interests in a global security will be limited to
participants or persons that may hold beneficial interests through participants.
Ownership of beneficial interests in a global security will be shown on, and the
transfer of that ownership will be effected only through, records maintained by
the depositary therefor or its nominee (with respect to beneficial interests of
participants) or by participants or persons that hold through participants (with
respect to beneficial interests of persons other than participants).
So long as the depositary for a global security or its nominee is the
registered owner of the global security, such depositary or such nominee, as the
case may be, will be considered the sole owner or holder of the debt securities
represented by the global security for all purposes under the Indenture. Except
as provided below, owners of beneficial interests in a global security will not
be entitled to have a series of the debt securities represented by the global
security registered in their names, will not receive or be entitled to receive
physical delivery of such series of the debt securities in definitive form and
will not be considered the owners or holders thereof under the Indenture.
The laws of some states in the United States require that certain purchasers
of debt securities take physical delivery of such debt securities in definitive
form. These depositary arrangements and these laws may impair the ability to
transfer beneficial interests in a global security.
Any payments of principal, and premium, if any, and interest, if any, on a
global security registered in the name of a depositary or its nominee will be
made to the depositary or its nominee, as the case may be, as the registered
owner of the global security representing such debt securities.
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None of us, the Trustee or any paying agent for the debt securities represented
by the global security will have any responsibility or liability for any aspect
of the records relating to or payments made on account of beneficial ownership
interests in a global security or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
We expect that the depositary for a global security or its nominee, upon
receipt of any payment of principal, and premium, if any, or interest, will
credit participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the global security
as shown on the records of such depositary or its nominee. We also expect that
payments by participants to owners of beneficial interests in a global security
held through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers registered in "street name", and will be the responsibility of
such participants.
If a depositary for a global security representing a particular series of
the debt securities is at any time unwilling or unable to continue as depositary
and a successor depositary is not appointed by us within 90 days, we will issue
such series of debt securities in definitive form in exchange for the global
security representing such series of debt securities. In addition, we may at any
time and in our sole discretion determine not to have a series of debt
securities represented by a global security and, in such event, will issue a
series of debt securities in definitive form in exchange for the global security
representing such series of debt securities.
DEBT SECURITIES IN DEFINITIVE FORM
If indicated in a prospectus supplement, the debt securities may be issued
in definitive form without coupons or in bearer form with or without coupons, or
in both forms. Debt securities in definitive form may be presented for exchange
and for registration of transfer in the manner, at the places and, subject to
the restrictions set forth in the Indenture and in the applicable prospectus
supplement, without service charge, but upon payment of any taxes or other
governmental charges due in connection therewith. We have initially appointed
the Trustee as security registrar. Debt securities in bearer form and the
coupons appertaining thereto, if any, will be transferable by delivery.
Unless otherwise indicated in a prospectus supplement, payment of principal,
and premium, if any, and interest on any debt securities in definitive form will
be made at the office or agency of the Trustee, at 101 Barclay Street, 21W,
New York, New York 10286, or at our option we can pay principal and any premium
and interest on the debt securities by (1) check mailed or delivered to the
address of the person entitled to receive payments appearing in the security
register of the Trustee or (2) wire transfer to an account in the United States
of the person entitled to receive payments if such person is a holder of
US $1 million or more in aggregate principal amount of the debt securities of a
particular series.
COVENANTS
LIMITATION ON LIENS
The Indenture includes a covenant of Petro-Canada to the effect that, so
long as any debt securities are outstanding and subject to all the provisions of
the Indenture, Petro-Canada will not, and will not permit any Restricted
Subsidiary to, create, assume or otherwise have outstanding any Security
Interest in, on or over any of its or their interest in any Restricted Property,
present or future, securing any Debt of any person, other than Permitted
Encumbrances, unless at the time thereof or prior thereto the debt securities
then outstanding under the Indenture are equally and ratably secured with
such Debt.
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LIMITATION ON SALE AND LEASEBACK TRANSACTIONS
Petro-Canada will not, nor will it permit any of its Restricted Subsidiaries
to, enter into any Sale and Leaseback Transaction with respect to any Restricted
Property owned by Petro-Canada or any Subsidiary on the Issue Date unless:
(i) such transaction involves a lease or right to possession or use for a
temporary period not to exceed three years following such sale, and
such lease does not create or evidence a Capital Lease Obligation; or
(ii) Petro-Canada or such Subsidiary would, on the effective date of such
transaction, be entitled to issue, assume or guarantee Debt secured by
a Security Interest on such property at least equal in amount to the
Attributable Debt in respect thereof, without equally and ratably
securing the debt securities then outstanding, as set forth under the
"Limitation on Liens" covenant described above; or
(iii) if the proceeds of such sale (A) are equal to or greater than the fair
market value (as determined by any two of the following: the Chairman,
the President, any Vice President, the Treasurer and the Controller of
Petro-Canada) of such property and (B) are applied within 270 days
after the receipt of such proceeds, directly or indirectly, to either
(i) the purchase, acquisition or construction of Restricted Property
to be used in the operation of the business of Petro-Canada or any of
its Restricted Subsidiaries or (ii) the repayment of Funded Debt
(including debt securities then outstanding) of Petro-Canada or any of
its Restricted Subsidiaries ranking equally and ratably with the debt
securities then outstanding. For purposes of the Indenture, any
Restricted Property purchased, acquired or constructed pursuant to
clause (B)(i) of this paragraph, will be deemed to have been
purchased, acquired or constructed prior to the Issue Date.
The preceding restrictions shall not apply to any Sale and Leaseback Transaction
between Petro-Canada and its Restricted Subsidiaries or between Restricted
Subsidiaries of Petro-Canada.
CONSOLIDATION, AMALGAMATION, MERGER AND SALE OF ASSETS
The Indenture includes a covenant of Petro-Canada to the effect that it may
not consolidate or amalgamate with or merge into or enter into any statutory
arrangement with any other corporation, or, directly or indirectly, convey,
transfer or lease all or substantially all of its property to any person,
unless:
- the entity formed by or continuing from such consolidation or amalgamation
or into which Petro-Canada is merged or with which Petro-Canada enters
into such arrangement, or the person which acquires or leases all or
substantially all of Petro-Canada's property, is organized and existing
under the laws of the United States, any state thereof or the District of
Columbia, the laws of Canada or any province or territory thereof, or, if
such consolidation, amalgamation, merger, arrangement or other transaction
would not impair the rights of holders of the debt securities, in any
other jurisdiction, PROVIDED THAT, if such successor entity is organized
under the laws of a jurisdiction other than Canada or the United States,
the successor entity assumes our obligations under the debt securities and
the Indenture to pay Additional Amounts, substituting the name of such
successor jurisdiction for Canada in each place that Canada appears in
"--Additional Amounts", below and submits to the jurisdiction of
U.S. federal and state courts in the manner and to the extent provided in
the Indenture;
- the successor entity expressly assumes or assumes by operation of law all
of Petro-Canada's obligations under the debt securities and under the
Indenture; and
- immediately after giving effect to such transaction, no event of default,
and no event which, after notice or lapse of time or both, would become an
event of default, shall have happened and be continuing.
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If, as a result of any such transaction, any Restricted Property of
Petro-Canada or any Restricted Subsidiary becomes subject to a Security
Interest, then, unless such Security Interest could be created pursuant to the
Indenture provisions described under the "LIMITATION ON LIENS" covenant above
without equally and ratably securing the debt securities, Petro-Canada,
simultaneously with or prior to such transaction, will cause the debt securities
to be secured equally and ratably with or prior to the Debt secured by such
Security Interest.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms.
"ATTRIBUTABLE DEBT" means, at the time of determination, the then present
value (discounted at the actual rate of interest of such transaction) of the
obligation of the lessee for net rental payments during the remaining term of
the lease (including any period for which such lease has been extended or may,
at the option of the lessor, be extended).
"CAPITAL LEASE OBLIGATION" means the obligation of a person, as lessee, to
pay rent or other amounts to the lessor under a lease of property which is
required to be classified and accounted for as a capital lease on the
consolidated balance sheet of such person in accordance with GAAP.
"CONSOLIDATED NET TANGIBLE ASSETS" means the total amount of assets as shown
on the most recent annual audited or quarterly unaudited consolidated balance
sheet of Petro-Canada and computed in accordance with GAAP, including
investments in unconsolidated subsidiaries, after deducting therefrom:
- all current liabilities (excluding any current liabilities constituting
Funded Debt by reason of their being renewable or extendible);
- all goodwill, trade names, trademarks, patents, unamortized debt discount
and expense and other similar intangibles; and
- appropriate adjustments on account of minority interests of other persons
holding stock of a Subsidiary.
"COSTS OF ABANDONMENT" means the costs and expenses incurred in the plugging
and abandonment of wells and the decommissioning or removal of structures or
Facilities located on an oil, gas or other mineral property (including an oil
sands property), and the reclamation and clean-up of such property and related
Facilities, interests and surrounding lands whether or not owned by Petro-Canada
or any of its Restricted Subsidiaries.
"CURRENT ASSETS" means current assets as determined in accordance with GAAP.
"DEBT" means all items which, in accordance with GAAP, would be recorded as
debt in the consolidated financial statements of any person, and in any event
including (without duplication):
- any obligation for borrowed money including reimbursement obligations with
respect to bankers' acceptances or similar facilities;
- any obligation evidenced by bonds, debentures, notes or other similar
instruments, including, without limitation, any such obligations incurred
in connection with the acquisition of property, assets or businesses;
- any Capital Lease Obligation;
- any reimbursement obligation with respect to letters of credit issued to
secure the payment of any Debt of any person;
- any payment obligation under Financial Instrument Obligations; and
- any guarantee of Debt of another person.
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"FACILITIES" means any drilling equipment, production equipment and
platforms or mining equipment; pipelines, pumping stations and other pipeline
facilities; terminals, warehouses and storage facilities; bulk plants;
production, separation, dehydration, extraction, treating and processing
facilities; gasification or natural gas liquefying facilities; flares, stacks
and burning towers; floatation mills, crushers and ore handling facilities; tank
cars, tankers, barges, ships, trucks, automobiles, airplanes and other marine,
automotive, aeronautical and other similar moveable facilities or equipment;
computer systems and associated programs or office equipment; roads, airports,
docks (including drydocks); reservoirs and waste disposal facilities; sewers;
generating plants (including power plants) and electric lines; telephone and
telegraph lines, radio and other communications facilities; townsites, housing
facilities, recreation halls, stores and other related facilities; and similar
facilities and equipment of or associated with any of the foregoing.
"FINANCIAL INSTRUMENT OBLIGATIONS" means obligations arising under:
- interest rate swap agreements, forward rate agreements, floor, cap or
collar agreements, futures or options, insurance or other similar
agreements or arrangements, or any combination thereof, entered into by a
person relating to interest rates or pursuant to which the price, value or
amount payable thereunder is dependent or based upon interest rates in
effect from time to time or fluctuations in interest rates occurring from
time to time;
- currency swap agreements, cross-currency agreements, forward agreements,
floor, cap or collar agreements, futures or options, insurance or other
similar agreements or arrangements, or any combination thereof, entered
into by a person relating to currency exchange rates or pursuant to which
the price, value or amount payable thereunder is dependent or based upon
currency exchange rates in effect from time to time or fluctuations in
currency exchange rates occurring from time to time; and
- commodity swap or hedging agreements, floor, cap or collar agreements,
commodity futures or options or other similar agreements or arrangements,
or any combination thereof, entered into by a person relating to one or
more commodities or pursuant to which the price, value or amount payable
thereunder is dependent or based upon the price of one or more commodities
in effect from time to time or fluctuations in the price of one or more
commodities occurring from time to time.
"FUNDED DEBT" means all Debt which, by its terms, matures more than
12 months from the date such Debt was incurred, or having a maturity of less
than 12 months but by its terms being renewable or extendable, at the sole
option of the obligor, beyond 12 months from the date such Debt was incurred.
"GAAP" means generally accepted accounting principles in Canada in effect
from time to time, unless Petro-Canada's most recent audited or quarterly
unaudited financial statements are not prepared in accordance with generally
accepted accounting principles in Canada, in which case GAAP shall mean
generally accepted accounting principles in the United States in effect from
time to time.
"ISSUE DATE" means the date that any series of debt securities is first
issued under the Indenture.
"NON-RECOURSE DEBT" means at any time Debt incurred to provide funds for or
otherwise finance (directly or indirectly) (i) the purchase price or other
acquisition cost of any property not owned by Petro-Canada or a Subsidiary on
the Issue Date, or (ii) costs and expenses incurred after the Issue Date for the
construction, development or installation of, or improvements to, any property,
or (iii) the costs and expenses incurred after the Issue Date in connection with
acquisition, surveying, exploration, drilling, development, extraction,
operation or production relating to or arising in connection with any oil, gas
or other mineral property (including oil sands property), including costs
incurred for the construction, alteration, repair, improvement or operation of
any and all Facilities relating to such property, or to projects, ventures or
other arrangements of which such property forms a part or which relate to such
property, whether or not such Facilities are in whole or in part located (or
from time to time located) at or on such property, and all related costs of
abandonment, PROVIDED THAT at such time the recourse of the lender thereof
(including any agent, trustee, receiver or
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other person acting on behalf of such lender) in respect of such Debt is limited
in all circumstances to (A) the property that is the subject of the acquisition,
construction, development or other relevant activities referred to in
clauses (i), (ii) or (iii) above, and to the receivables, inventory, equipment,
chattel payables, contracts, intangibles and other assets, rights or collateral
connected with such property and the proceeds thereof, and (B) in the case of
any Debt referred to in clause (iii), any contiguous or associated oil, gas or
mineral properties (including oil sands properties) and any Facilities or other
property used or to be used in connection with any such oil, gas or mineral
properties (including oil sands properties), whether or not such Facilities are
located (or located from time to time) at or on such property, other than
recourse (which shall be on an unsecured basis) against the other property of
Petro-Canada or any Subsidiary for a breach of representations and warranties or
non-financial covenants made by such person in connection with such Debt to the
extent such representations and warranties or non-financial covenants are
customarily given in similar type financings.
"PERMITTED ENCUMBRANCES" means:
- any Security Interest existing as of the Issue Date;
- any Security Interest existing on the property of any person when such
person becomes a Restricted Subsidiary, or arising thereafter pursuant to
contractual commitments entered into prior to and not in contemplation of
such person becoming a Restricted Subsidiary;
- any Security Interest on the property of any person which Security
Interest exists at the time such person is merged into or amalgamated or
consolidated with Petro-Canada or a Restricted Subsidiary, or such
property is otherwise acquired by Petro-Canada or a Restricted Subsidiary
(including by way of lease), PROVIDED THAT such Security Interest does not
extend to property owned by Petro-Canada or a Restricted Subsidiary prior
to such merger, amalgamation, consolidation or acquisition;
- any Security Interest on property acquired by Petro-Canada or a Restricted
Subsidiary after the Issue Date given in connection with a Capital Lease
Obligation;
- any Security Interest given in connection with a Sale and Leaseback
Transaction permitted by clause (iii) of the "Limitation on Sale and
Leaseback Transactions" set out above;
- any Security Interest in favor of Petro-Canada, any Restricted Subsidiary
or any wholly-owned Subsidiary;
- any Security Interest in Current Assets given to secure any Debt repayable
on demand or maturing, including any right of extension or renewal, within
12 months after the date such Debt is incurred;
- any Security Interest granted (i) on cash or securities issued by the
United States or Canada or any agency or instrumentality of the
United States or Canada or any state or province thereof, as the case may
be, or (ii) in the ordinary course of business, in either case in
connection with Financial Instrument Obligations;
- any Security Interest in any Restricted Property in favor of any federal
government or any province, state or territory thereof or any municipality
therein or any political subdivision, department, agency or
instrumentality of any of them to secure the performance of any covenant
or obligation to or in favor of or entered into at the request of such
authorities where such security is required pursuant to any contract,
statute or regulation or with respect to any franchise, grant, license or
permit (including related to periodic payments in connection therewith) or
arises by operation of law and any defects in title to structures or other
facilities arising solely from the fact that such structures or facilities
are constructed or installed on lands held by us under government permits,
leases or grants, PROVIDED THAT such Security Interest is not given in
connection with borrowed money;
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- any Security Interest in any oil, gas or other mineral property or
products derived from such property to secure obligations incurred or
guarantees of obligations incurred in connection with or necessarily
incidental to commitments of purchase or sale of, or the transportation,
storage or distribution of, such property or the products derived from
such property, PROVIDED THAT such Security Interest is not given in
connection with borrowed money;
- any Security Interest arising under partnership agreements, oil and
natural gas leases, overriding royalty agreements, net profits agreements,
royalty trust agreements, master limited partnership agreements, farm-out
agreements, division orders, utilization and pooling designations,
declarations, orders and agreements, joint venture agreements, development
agreements, operating agreements, production sales contracts (including
security in respect of take or pay or similar obligations thereunder),
area of mutual interest agreements, natural gas balancing or deferred
production agreements, injection, repressuring and recycling agreements,
salt water or other disposal agreements, seismic or geophysical permits or
agreements, which in each of the foregoing cases is customary in the oil
and natural gas business, and other similar agreements which are customary
in the oil and natural gas business, PROVIDED THAT such Security Interest
is (i) limited to the assets that are the subject of the relevant
agreement and the proceeds of such assets, and (ii) not given in
connection with borrowed money;
- any Security Interest (i) securing the purchase price or other acquisition
cost of any property not owned by Petro-Canada or a Subsidiary on the
Issue Date, or (ii) securing costs and expenses incurred after the Issue
Date for the construction, development or installation of, or improvements
to, any property, or (iii) securing the costs and expenses incurred after
the Issue Date in connection with surveying, exploration, drilling,
development, extraction, operation or production relating to or arising in
connection with any oil, gas or other mineral property (including oil
sands property) or with the acquisition thereof, including costs incurred
for the acquisition, construction, alteration, repair, improvement or
operation of any and all Facilities relating to such property, or to
projects, ventures or other arrangements of which such property forms a
part or which relate to such property, whether or not such Facilities are
in whole or in part located (or from time to time located) at or on such
property, and all related costs of abandonment, or (iv) securing Debt
created, issued, incurred or assumed by Petro-Canada or any of its
Subsidiaries to provide funds for, or otherwise finance (directly or
indirectly), the activities set forth in clauses (i), (ii) and (iii)
above, if such Debt is incurred prior to, during or within two years after
the completion of acquisition, construction, development or the other
relevant activities referred to in clauses (i), (ii) or (iii) above and
does not exceed the cost of such acquisition, construction, development or
other activities, as applicable; PROVIDED, HOWEVER, that any such Security
Interest shall be limited to (A) the property that is the subject of the
acquisition, construction, development or other relevant activities
referred to in clauses (i), (ii) or (iii) above, and to the receivables,
inventory, equipment, chattel payables, contracts, intangibles and other
assets, rights or collateral connected with such property and the proceeds
thereof, and (B) in the case of any Security Interest referred to in
clause (iii), any contiguous or associated oil, gas or mineral properties
(including oil sands properties) and any Facilities or other property, in
each case, used or to be used in connection with any such oil, gas or
mineral properties (including oil sands properties), whether or not such
Facilities are located (or located from time to time) at or on such
property;
- any Security Interest on cash or securities deposited with a trustee or
collateral agent to defease Debt secured by such Security Interest;
- any Security Interest arising by reason of (i) any judgment, decree or
order of any court, so long as any appropriate legal proceedings which may
have been initiated for the review of such judgment, decree or order shall
not have been finally terminated or so long as the period within which
such proceedings may be initiated shall not have expired, or (ii) any
deposit or pledge with any surety company or clerk of any court, or in
escrow, as collateral in connection with, or in lieu of, any bond on
appeal from any judgment or decree against Petro-Canada or any Subsidiary,
or in connection with other proceedings or actions at law or in equity by
or
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against Petro-Canada or any Subsidiary, PROVIDED THAT such Security
Interest is not given in connection with borrowed money;
- any Security Interest referred to in the foregoing clauses or this clause
securing any extension, renewal, alteration or replacement of all or part
of any Debt secured by such Security Interest, PROVIDED THAT:
- the principal amount of such Debt is not increased by an amount
exceeding the cost of such extension, renewal, alteration or
replacement, including but not limited to all fees and expenses
incurred in connection therewith; and
- the Security Interest is limited to all or part of the property which
secured the Debt prior to it being extended, renewed, altered or
replaced, plus improvements on such property and the proceeds thereof
and all rights associated therewith; and
- any Security Interest that would otherwise be prohibited, provided that
the aggregate of all Debt outstanding and secured under this clause and
all Attributable Debt in respect of Sale and Leaseback Transactions
entered into after the Issue Date which were permitted under the Indenture
solely by clause (ii) of the "Limitation on Sale and Leaseback
Transactions" covenant described above does not (calculated at the time of
the granting of the Security Interest) exceed an amount equal to 10% of
Consolidated Net Tangible Assets.
Any transaction consisting of the sale (including any forward sale) or other
transfer of oil, gas or other minerals, whether in place or when produced, for a
period of time until, or in amount such that, the purchaser will realize a
specified amount of money or minerals or any other interest in property
(commonly characterized as a "production payment"), will not constitute a
Security Interest and will not result in Petro-Canada or a Restricted Subsidiary
being required to secure the debt securities.
"PERSON" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"PROPERTY" means all assets and property, both real and personal, of any
person.
"RESTRICTED PROPERTY" means any oil, gas or mineral property of a primary
nature located in the United States, Canada or the United Kingdom, and any
facilities located in the United States, Canada or the United Kingdom directly
related to the mining, processing or manufacture of hydrocarbons or minerals, or
any of the constituents thereof, and includes Voting Shares or other interests
of a Restricted Subsidiary which owns such property or facilities, but does not
include (i) any property or facilities used in connection with or necessarily
incidental to the purchase, sale, storage, transportation or distribution of
hydrocarbons or minerals or products derived therefrom, (ii) any property which,
in the opinion of Petro-Canada's board of directors, is not materially important
to the total business conducted by Petro-Canada and its Subsidiaries as an
entirety or (iii) any portion of a particular property which, in the opinion of
Petro-Canada's board of directors, is not materially important to the use or
operation of such property.
"RESTRICTED SUBSIDIARY" means, on any date, any Subsidiary of Petro-Canada
which owns at the time Restricted Property; provided, however, such term shall
not include a Subsidiary of Petro-Canada if the amount of Petro-Canada's share
of Shareholders' Equity of such Subsidiary constitutes, at the time of
determination, less than 2% of Petro-Canada's Consolidated Net Tangible Assets.
"SALE AND LEASEBACK TRANSACTION" means an arrangement with any lender or
investor or to which such lender or investor is a party providing for the
leasing by Petro-Canada or a Restricted Subsidiary of any property owned by
Petro-Canada or any Subsidiary on the Issue Date.
"SECURITY INTEREST" means any security by way of an assignment, mortgage,
charge, pledge, lien, encumbrance, title retention agreement or other security
interest whatsoever, howsoever created or arising, whether absolute or
contingent, fixed or floating, perfected or not, but not including any security
interest in respect of a lease which does not create or evidence a Capital Lease
Obligation or
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any encumbrance that may be deemed to arise solely as a result of entering into
an agreement not in violation of the Indenture to sell or otherwise transfer
property.
"SHAREHOLDERS' EQUITY" means shareholders' equity of Petro-Canada as shown
on the most recent annual audited or quarterly unaudited consolidated balance
sheet of Petro-Canada and computed in accordance with GAAP.
"SIGNIFICANT SUBSIDIARY" means a Restricted Subsidiary that constitutes a
"significant subsidiary" as defined in Rule 1-02 of Regulation S-X of the
Exchange Act.
"SUBSIDIARY" means any corporation or other person of which Voting Shares or
other interests carrying more than 50% of the voting rights attached to all
outstanding Voting Shares or other interests are owned, directly or indirectly,
by Petro-Canada or by one or more Subsidiaries of Petro-Canada, or by
Petro-Canada and one or more Subsidiaries of Petro-Canada.
"VOTING SHARES" means shares of any class of a corporation having under all
circumstances the right to vote for the election of the directors of such
corporation, PROVIDED THAT, for the purpose of this definition, shares which
only carry the right to vote conditionally on the happening of an event shall
not be considered Voting Shares whether or not such event shall have happened.
ADDITIONAL AMOUNTS
Unless otherwise specified in a prospectus supplement, all payments made by
us under or with respect to the debt securities will be made free and clear of
and without withholding or deduction for or on account of any present or future
tax, duty, levy, impost, assessment or other governmental charge (including
penalties, interest and other liabilities related thereto) imposed or levied by
or on behalf of the Government of Canada or any province or territory thereof or
by any authority or agency therein or thereof having power to tax ("Canadian
Taxes"), unless we are required to withhold or deduct Canadian Taxes by law or
by the interpretation or administration thereof. If we are so required to
withhold or deduct any amount for or on account of Canadian Taxes from any
payment made under or with respect to the debt securities, we will pay to each
holder of such debt securities as additional interest such additional amounts
("Additional Amounts") as may be necessary so that the net amount received by
each such holder after such withholding or deduction (and after deducting any
Canadian Taxes on such Additional Amounts) will not be less than the amount such
holder would have received if such Canadian Taxes had not been withheld or
deducted. However, no Additional Amounts will be payable with respect to a
payment made to a debt securities holder (such holder, an "Excluded Holder") in
respect of the beneficial owner thereof:
- with which we do not deal at arm's length (within the meaning of the
INCOME TAX ACT (Canada)) at the time of making such payment;
- which is subject to such Canadian Taxes by reason of the holder of the
debt securities being a resident, domicile or national of, or engaged in
business or maintaining a permanent establishment or other physical
presence in or otherwise having some connection with Canada or any
province or territory thereof otherwise than by the mere holding of debt
securities or the receipt of payments thereunder;
- which is subject to such Canadian Taxes by reason of the holder's failure
to comply with any certification, identification, documentation or other
reporting requirements if compliance is required by law, regulation,
administrative practice or an applicable treaty as a precondition to
exemption from, or a reduction in the rate of deduction or withholding of,
such Canadian Taxes; or
- which by reason of the legal nature of the holder of the debt securities
is disentitled to the benefit of an applicable treaty.
We will also make such withholding or deduction and remit the full amount
deducted or withheld to the relevant authority in accordance with applicable
law.
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We will furnish to the holders of the debt securities, within 60 days after
the date the payment of any Canadian Taxes is due pursuant to applicable law,
certified copies of tax receipts or other documents evidencing such payment by
us.
We will indemnify and hold harmless each holder of debt securities (other
than an Excluded Holder) and upon written request reimburse each such holder for
the amount, excluding any payment of Additional Amounts by us, of:
- any Canadian Taxes levied or imposed and paid by such holder as a result
of payments made under or with respect to the debt securities;
- any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto; and
- any Canadian Taxes imposed with respect to any reimbursement under the
preceding two bullet points, but excluding any such Canadian Taxes on such
holder's net income.
Wherever in the Indenture there is mentioned, in any context, the payment of
principal, and premium, if any, interest or any other amount payable under or
with respect to a debt security, such mention shall be deemed to include mention
of the payment of Additional Amounts to the extent that, in such context,
Additional Amounts are, were or would be payable in respect thereof.
TAX REDEMPTION
Unless otherwise specified in a prospectus supplement, a series of debt
securities will be subject to redemption at any time, in whole but not in part,
at a redemption price equal to the principal amount thereof together with
accrued and unpaid interest to the date fixed for redemption, upon the giving of
a notice as described below, if we (or our successor) determine that (i) as a
result of (A) any amendment to or change (including any announced prospective
change) in the laws (or any regulations thereunder) of Canada (or our
successor's jurisdiction of organization) or of any political subdivision or
taxing authority thereof or therein, as applicable, or (B) any amendment to or
change in an interpretation or application of such laws or regulations by any
legislative body, court, governmental agency or regulatory authority (including
the enactment of any legislation and the publication of any judicial decision or
regulatory determination), which amendment or change is announced or becomes
effective on or after the date specified in the applicable prospectus supplement
(or the date a party organized in a jurisdiction other than Canada or the
United States becomes our successor), we have or will become obligated to pay,
on the next succeeding date on which interest is due, additional amounts with
respect to any debt security of such series as described under "Additional
Amounts", or (ii) on or after the date specified in the applicable prospectus
supplement (or the date a party organized in a jurisdiction other than Canada or
the United States becomes our successor), any action has been taken by any
taxing authority of, or any decision has been rendered by a court of competent
jurisdiction in, Canada (or our successor's jurisdiction of organization) or any
political subdivision or taxing authority thereof or therein, including any of
those actions specified in (i) above, whether or not such action was taken or
decision was rendered with respect to us, or any change, amendment, application
or interpretation shall be officially proposed, which, in any such case, in the
written opinion to us of legal counsel of recognized standing, will result in
our becoming obligated to pay, on the next succeeding date on which interest is
due, Additional Amounts with respect to any debt security of such series and, in
any such case, we, in our business judgment, determine that such obligation
cannot be avoided by the use of reasonable measures available to us.
In the event that we elect to redeem a series of the debt securities
pursuant to the provisions set forth in the preceding paragraph, we shall
deliver to the Trustee a certificate, signed by an authorized officer, stating
that we are entitled to redeem such series of the debt securities pursuant to
their terms.
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Notice of intention to redeem such series of our debt securities will be
given not more than 60 nor less than 30 days prior to the date fixed for
redemption and will specify the date fixed for redemption.
PROVISION OF FINANCIAL INFORMATION
We will furnish to the Trustee, within 30 days after we file them with or
furnish them to the SEC, copies (which may be electronic copies) of our annual
and quarterly reports and of the information, documents and other reports (or
copies of such portions of any of the foregoing as the SEC may by rules and
regulations prescribe) which we are required to file with or furnish to the SEC
pursuant to Section 13 or 15(d) of the Exchange Act.
In the event that we may not remain subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act or otherwise report on an annual and
quarterly basis on forms provided for such annual and quarterly reporting
pursuant to rules and regulations promulgated by the SEC, we will continue to
furnish to the Trustee:
- within the time periods required for the filing of annual information
forms and annual financial statements (or similar annual filings) by the
Canadian securities regulatory authorities, the information required to be
provided or incorporated by reference in an annual information form,
annual financial statement or similar annual filing under the laws of
Canada or any province thereof to security holders of a corporation with
securities listed on the Toronto Stock Exchange, whether or not we have
any of our securities listed on such exchange; and
- within the time periods required for the filing of quarterly reports by
the Canadian securities regulatory authorities, the information required
to be provided in quarterly reports under the laws of Canada or any
province thereof to security holders of a corporation with securities
listed on the Toronto Stock Exchange, whether or not we have any of our
securities listed on such exchange.
EVENTS OF DEFAULT
Unless otherwise provided in a prospectus supplement, the following are
summaries of events with respect to any series of our debt securities which will
constitute an event of default with respect to the debt securities of that
series:
- default in the payment of the principal of, or premium, if any, on, any
debt security when it becomes due and payable;
- default in the payment of any interest on any debt security, when it
becomes due and payable, and continuance of such default for a period of
30 days;
- default in observing or performing any of the covenants described above
under "Consolidation, Amalgamation, Merger and Sale of Assets", and
continuance of such default for a period of 15 days;
- default in the performance, or breach, of any other applicable covenant or
warranty of Petro-Canada in the Indenture, and continuance of such default
or breach for a period of 90 days after written notice has been given to
us by the Trustee or by the holders of at least 25% in principal amount of
all outstanding debt securities of any series affected thereby;
- default in the performance of any covenant of Petro-Canada or any
Restricted Subsidiary contained in any instrument (other than the
Indenture) under which Debt (other than Non-Recourse Debt) is created or
issued if such Debt has an outstanding principal amount in excess of the
greater of US $75 million and 2% of Shareholders' Equity at the time of
default and the holders of such Debt, or a trustee, if any, for those
holders, declare such Debt to be due and payable prior to the stated
maturity of such Debt, and such acceleration shall not be rescinded or
annulled, or such default shall not be remedied or cured, whether by
payment or otherwise, or waived by the holders of such accelerated Debt
within a period of seven days
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after such Debt has been accelerated (or, if such acceleration is the
result of an event of default which is not related to the failure to pay
principal or interest, within 30 days after such Debt has been
accelerated);
- certain events in bankruptcy, insolvency, assignment for the benefit of
creditors or analogous process relating to Petro-Canada or any Significant
Subsidiary of Petro-Canada, as described in the Indenture; or
- any other events of default provided with respect to debt securities of
that series.
If an event of default occurs and is continuing with respect to debt
securities of any series, unless the principal of all of the debt securities of
that series shall have already become due and payable, the Trustee may, in its
discretion, and shall upon request in writing made by the holders of not less
than 25% in aggregate principal amount of all outstanding debt securities
affected by such event of default, declare the principal of, and premium, if
any, on, all the outstanding debt securities of that series and the interest
accrued thereon and all other money, if any, owing under the provisions of the
Indenture in respect of those debt securities, to be immediately due and
payable.
Subject to certain conditions contained in the Indenture, the holders of a
majority of the principal amount of the outstanding debt securities of the
affected series can rescind this accelerated payment requirement.
Subject to certain limitations contained in the Indenture, the holders of a
majority in principal amount of the outstanding debt securities of all series
affected by an event of default shall have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred on the Trustee, with respect to the
debt securities of all series affected by such event of default.
No holder of a debt security of any series will have any right to institute
any proceeding with respect to the Indenture, or for the appointment of a
receiver or a trustee, or for any other remedy under the Indenture, unless:
- such holder has previously given to the Trustee written notice of a
continuing event of default with respect to the debt securities of such
series affected by such event of default;
- the holders of at least 25% in aggregate principal amount of the
outstanding debt securities of those series (voting as one class) affected
by such event of default have made written request, and such holder or
holders have offered reasonable indemnity, to the Trustee to institute
such proceeding as Trustee; and
- the Trustee has failed to institute such proceeding, and has not received
from the holders of a majority in aggregate principal amount of the
outstanding debt securities of those series affected by such event of
default a direction inconsistent with such request, within 60 days after
such notice, request and offer.
However, such above-mentioned limitations do not apply to a suit instituted
by the holder of a debt security for the enforcement of payment of the principal
of or any premium or interest on such debt security on or after the applicable
due date specified in such debt security.
The Indenture requires that we annually furnish to the Trustee a statement
by certain of our officers as to whether or not Petro-Canada, to the best of
their knowledge, is in compliance with all conditions and covenants of the
Indenture and, if not, specifying all such known defaults. We will also be
required under the Indenture to notify the Trustee as soon as practicable upon
becoming aware of any event of default.
DEFEASANCE
Unless otherwise specified in the applicable prospectus supplement, the
Indenture provides that, at our option, we will be discharged from any and all
obligations in respect of the outstanding debt securities of any series upon
irrevocable deposit with the Trustee, in trust, of money and/or
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government securities which will provide money in an amount sufficient in the
opinion of a nationally recognized firm of independent chartered accountants to
pay the principal of and premium, if any, and each installment of interest on
the outstanding debt securities of such series ("Defeasance") (except with
respect to the authentication, transfer, exchange or replacement of our debt
securities or the maintenance of a place of payment and certain other
obligations set forth in the Indenture). Such trust may only be established if,
among other things:
- we have delivered to the Trustee an opinion of counsel in the
United States stating that Petro-Canada has received from, or there has
been published by, the Internal Revenue Service a ruling or, since the
Issue Date, there has been a change in the applicable U.S. federal income
tax law, in either case to the effect that the holders of the outstanding
debt securities of such series will not recognize income, gain or loss for
U.S. federal income tax purposes as a result of such Defeasance and will
be subject to U.S. federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
Defeasance had not occurred;
- we have delivered to the Trustee an opinion of counsel in Canada or a
ruling from Canada Customs and Revenue Agency to the effect that the
holders of the outstanding debt securities of such series will not
recognize income, gain or loss for Canadian federal or provincial income
or other tax purposes as a result of such Defeasance and will be subject
to Canadian federal or provincial income and other tax on the same
amounts, in the same manner and at the same times as would have been the
case had such Defeasance not occurred (and for the purposes of such
opinion, such Canadian counsel shall assume that holders of the
outstanding debt securities of such series include holders who are not
resident in Canada);
- we are not an "insolvent person" within the meaning of the BANKRUPTCY AND
INSOLVENCY ACT (Canada) on the date of such deposit or at any time during
the period ending on the 91st day following such deposit; and
- no event of default or event that, with the passing of time or the giving
of notice, or both, shall constitute an event of default, shall have
occurred and be continuing on the date of such deposit.
We may exercise our Defeasance option notwithstanding our prior exercise of
our Covenant Defeasance option described in the following paragraph if we meet
the conditions described in the preceding sentence at the time we exercise the
Defeasance option.
The Indenture provides that, at our option, unless and until we have
exercised our Defeasance option described in the preceding paragraph, we may
omit to comply with the "Limitation on Liens," "Consolidation, Amalgamation,
Merger and Sale of Assets" and "Limitation on Sale and Leaseback Transactions"
covenants and certain other covenants and such omission shall not be deemed to
be an event of default under the Indenture upon irrevocable deposit with the
Trustee, in trust, of money and/or government securities which will provide
money in an amount sufficient in the opinion of a nationally recognized firm of
independent chartered accountants to pay the principal of and premium, if any,
and each installment of interest, if any, on the outstanding debt securities
("Covenant Defeasance"). If we exercise our Covenant Defeasance option, the
obligations under the Indenture other than with respect to such covenants and
the events of default with respect to such covenants shall remain in full force
and effect. Such trust may only be established if, among other things:
- we have delivered to the Trustee an opinion of counsel in the
United States to the effect that the holders of the outstanding debt
securities will not recognize income, gain or loss for U.S. federal income
tax purposes as a result of such Covenant Defeasance and will be subject
to U.S. federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Covenant Defeasance had
not occurred;
- we have delivered to the Trustee an opinion of counsel in Canada or a
ruling from Canada Customs and Revenue Agency to the effect that the
holders of the outstanding debt securities will not recognize income, gain
or loss for Canadian federal or provincial income or other tax
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purposes as a result of such Covenant Defeasance and will be subject to
Canadian federal or provincial income and other tax on the same amounts,
in the same manner and at the same times as would have been the case had
such Covenant Defeasance not occurred (and for the purposes of such
opinion, such Canadian counsel shall assume that holders of our
outstanding debt securities include holders who are not resident in
Canada);
- we are not an "insolvent person" within the meaning of the Bankruptcy and
Insolvency Act (Canada) on the date of such deposit or at any time during
the period ending on the 91st day following such deposit; and
- no event of default or event that, with the passing of time or the giving
of notice, or both, shall constitute an event of default, shall have
occurred and be continuing on the date of such deposit.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by us and the
Trustee with the consent of the holders of a majority in principal amount of the
outstanding debt securities of each series issued under the Indenture affected
by such modification or amendment (voting as one class); provided that no such
modification or amendment may, without the consent of the holder of each
outstanding debt security of such affected series:
- change the stated maturity of the principal of, or extend the scheduled
time of payment of any installment of interest, if any, on any debt
security;
- reduce the principal amount of, or premium, if any, or interest rate, if
any, on any debt security;
- change the place of payment;
- change the currency of payment of principal of, or premium, if any, or
interest, if any, on any debt security;
- impair the right to institute suit for the enforcement of any payment on
or with respect to any debt security;
- reduce the percentage of principal amount of outstanding debt securities
of such series, the consent of the holders of which is required for
modification or amendment of Indenture provisions or for waiver of
compliance with provisions of the Indenture or for waiver of defaults; or
- modify any provisions of the Indenture relating to the modification and
amendment of the Indenture or the waiver of past defaults or covenants,
except as otherwise specified in the Indenture.
The holders of a majority in principal amount of the outstanding debt
securities of any series (or of all affected series, as the case may be) may on
behalf of the holders of all debt securities of such series waive, insofar as
that series is concerned, compliance by us with certain restrictive provisions
of the Indenture. The holders of a majority in principal amount of outstanding
debt securities of any series (or of all affected series, as the case may be)
may waive any past default under the Indenture with respect to such series,
except a default in the payment of the principal of, or premium, if any, and
interest, if any, on any debt security of such series or in respect of a
provision which under the Indenture cannot be modified or amended without the
consent of the holder of each outstanding debt security of such series.
The Indenture or the debt securities may be amended or supplemented, without
the consent of any holder of such debt securities, in order to, among other
things, cure any ambiguity or inconsistency that, in each case, does not
materially adversely affect the rights of any holder of such debt securities.
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RESIGNATION OF TRUSTEE
The Trustee may resign or be removed with respect to one or more series of
debt securities and a successor Trustee may be appointed to act with respect to
such series. In the event that two or more persons are acting as Trustee with
respect to different series of debt securities, each such Trustee shall be a
Trustee of a trust under the Indenture separate and apart from the trust
administered by any other such Trustee, and any action described herein to be
taken by the "Trustee" may then be taken by each such Trustee with respect to,
and only with respect to, the one or more series of debt securities for which it
is Trustee.
GOVERNING LAW
Our debt securities and the Indenture will be governed by and construed in
accordance with the laws of the State of New York.
CONSENT TO JURISDICTION AND SERVICE
Under the Indenture, we have irrevocably appointed CT Corporation System,
111 Eighth Avenue, 13th Floor, New York, New York 10011, as our authorized agent
for service of process in any suit or proceeding arising out of or relating to
the debt securities or the Indenture and for actions brought under U.S. federal
or state securities laws in any U.S. federal or state court located in the
Borough of Manhattan in The City of New York, New York, and we have irrevocably
submitted to the non-exclusive jurisdiction of such courts.
ENFORCEABILITY OF CIVIL LIABILITIES UNDER THE U.S. FEDERAL SECURITIES LAWS
A substantial portion of our assets are located outside the United States
and some or all of the directors and officers and some or all of the experts
named in this prospectus are residents of Canada. As a result, it may be
difficult for investors to effect service within the United States upon us and
upon those directors, officers and experts, or to realize in the United States
upon judgments of courts of the United States predicated upon our civil
liability and the civil liability of our directors, officers or experts under
the United States federal securities laws. We have been advised by Fraser Milner
Casgrain LLP that there is doubt as to the enforceability in Canada in original
actions, or in actions to enforce judgments of United States courts, of civil
liabilities predicated solely upon United States federal securities laws.
PLAN OF DISTRIBUTION
We may sell the debt securities to or through underwriters or dealers. We
may also sell the debt securities to one or more other purchasers directly or
through agents.
The applicable prospectus supplement will set forth the terms of the
offering, including the name or names of any underwriters or agents, the
purchase price or prices of the debt securities to be offered, the proceeds to
us from the sale of the debt securities to be offered, any initial public
offering price, any underwriting discount or commission and any discounts,
concessions or commissions allowed or reallowed or paid by any underwriter to
other dealers. Any initial public offering price and any discounts, concessions
or commissions allowed or reallowed or paid to dealers may be changed from time
to time.
The debt securities may be sold from time to time in one or more
transactions at a fixed price or fixed prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to these
prevailing market prices or at negotiated prices.
If indicated in the applicable prospectus supplement, we may authorize
dealers or other persons acting as our agents to solicit offers by certain
institutions to purchase the debt securities directly from us pursuant to
contracts providing for payment and delivery on a future date. These contracts
will be subject only to the conditions set forth in the applicable prospectus
supplement or supplements, which will also set forth the commission payable for
solicitation of these contracts.
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Underwriters, dealers and agents who participate in the distribution of the
debt securities may be entitled under agreements to be entered into with us to
indemnification by us against certain liabilities, including liabilities under
the U.S. Securities Act of 1933, as amended, or to contribution with respect to
payments which those underwriters, dealers or agents may be required to make in
respect thereof. Those underwriters, dealers and agents may be customers of,
engage in transactions with or perform services for us in the ordinary course of
business.
The debt securities offered by this prospectus have not been qualified for
sale under the securities laws of any province or territory of Canada and are
not being and may not be offered or sold in Canada in contravention of the
securities laws of any province or territory of Canada. Each underwriter and
each dealer participating in the distribution of any series of debt securities
must agree that it will not offer or sell, directly or indirectly, any such debt
securities acquired by it in connection with such distribution, in Canada or to
residents of Canada in contravention of securities laws of Canada or any
province or territory of Canada.
Each series of the debt securities will be a new issue of securities with no
established trading market. Unless otherwise specified in an applicable
prospectus supplement relating to a series of debt securities, the debt
securities will not be listed on any securities exchange or on any automated
dealer quotation system. Some broker-dealers may make a market in the debt
securities, but they will not be obligated to do so and may discontinue any
market-making activities at any time without notice. No assurance can be given
as to the liquidity of the trading market for the debt securities of any series
or that an active public market for the debt securities of any series will
develop. If an active public trading market for the debt securities of any
series does not develop, the market price and liquidity of such series of debt
securities may be adversely affected.
CERTAIN INCOME TAX CONSIDERATIONS
The applicable prospectus supplement will describe the material Canadian
federal income tax consequences to investors of purchasing, owning and disposing
of debt securities, including, in the case of an investor who is not a resident
of Canada, whether payments of principal, premium, if any, and interest will be
subject to Canadian non-resident withholding tax.
The applicable prospectus supplement will also describe certain
U.S. federal income tax consequences of the purchase, ownership and disposition
of the debt securities by an investor who is a United States person, including,
to the extent applicable, certain relevant U.S. federal income tax rules
pertaining to capital gains and ordinary income treatment, original issue
discount, backup withholding and the foreign tax credit, and any consequences
relating to debt securities payable in a currency other than U.S. dollars,
issued at an original discount for U.S. federal income tax purposes or
containing early redemption provisions or other special terms.
RISK FACTORS
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS SET FORTH BELOW AS WELL AS
THE OTHER INFORMATION CONTAINED IN AND INCORPORATED BY REFERENCE IN THIS
PROSPECTUS AND IN THE APPLICABLE PROSPECTUS SUPPLEMENT BEFORE PURCHASING THE
DEBT SECURITIES. IF ANY EVENT ARISING FROM THESE RISKS OCCURS, OUR BUSINESS,
PROSPECTS, FINANCIAL CONDITION, RESULTS OF OPERATION AND CASH FLOWS COULD BE
MATERIALLY ADVERSELY AFFECTED.
A SUBSTANTIAL OR EXTENDED DECLINE IN CRUDE OIL AND GAS PRICES COULD HAVE A
MATERIAL ADVERSE EFFECT ON US.
Our financial condition depends substantially upon the prevailing prices of
crude oil and gas. Fluctuations in crude oil or gas prices could have an adverse
effect on our financial condition and the value and amount of our reserves.
Prices for crude oil and gas fluctuate in response to changes in the supply of
and demand for crude oil and gas, market uncertainty and a variety of additional
factors beyond our control. Factors which affect crude oil and gas prices
include the actions of the Organization of Petroleum Exporting Countries, world
economic conditions, government regulation,
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political developments, especially in the Middle East but also elsewhere, the
foreign supply of oil, the price of foreign imports, the availability of
alternate fuel sources and weather conditions. Canadian gas prices are primarily
affected by North American supply and demand, weather conditions, the level of
industry inventories, political events and, to a lesser extent, by prices of
alternate sources of energy.
As of the date of this prospectus, the price of crude oil and gas has
recently been high compared to recent historical standards. Any substantial or
extended decline in the prices of crude oil and gas could result in a delay or
cancellation of existing or future drilling, development or construction
programs or curtailment in production at some properties or result in unutilized
long term transportation commitments, all of which could have an adverse effect
on our revenues, profitability and cash flows.
In addition, our results of operations are also affected by the price of
refinery feedstock, the demand for our pipeline transportation capacity and the
demand for refined petroleum products. The margins we realize for refined
products are affected by crude oil price fluctuations, which affect refinery
feedstock costs, and third party refined product purchases. Our ability to
maintain product margins in an environment of higher feedstock costs is
contingent upon our ability to pass higher costs on to our customers. The
profitability of our interests in Syncrude (12 per cent working interest) in
regard to its upgrading operations depends upon the revenue from the synthetic
crude oil produced exceeding the costs of the heavy oil feedstock and the
related operating costs.
We conduct an annual assessment of the carrying value of our assets in
accordance with Canadian GAAP. If oil and gas prices decline, the carrying value
of our assets could be subject to downward financial revisions, and our earnings
could be adversely affected.
A FAILURE TO ACQUIRE OR FIND ADDITIONAL RESERVES WOULD CAUSE A DECLINE IN OUR
RESERVES AND PRODUCTION.
Our future oil and gas reserves and production, and therefore our cash
flows, are highly dependent upon our success in exploiting our current reserve
base and acquiring or discovering additional reserves. Without reserve additions
through exploration, acquisition or development activities, our reserves and
production will decline over time as reserves are depleted. The business of
exploring for, developing or acquiring reserves is capital intensive. To the
extent cash flows from operations are insufficient to fund our capital
expenditures and external sources of capital become limited or unavailable, our
ability to make the necessary capital investments to maintain oil and gas
reserves will be impaired. Costs to find and develop or acquire additional
reserves depend on success rates which vary over time.
OUR OIL AND GAS RESERVE DATA AND FUTURE NET REVENUE ESTIMATES ARE UNCERTAIN.
There are numerous uncertainties inherent in estimating quantities of oil
and gas reserves, including many factors beyond our control. The reserve data
included and incorporated in this prospectus by reference represents estimates
only. We have internally prepared all of our reserve data. In general, estimates
of economically recoverable oil and gas reserves are based upon a number of
variable factors and assumptions made as of the date on which the reserves
estimates were determined, such as product prices, future operating and capital
costs, historical production from the properties and the assumed effects of
regulation by governmental agencies, all of which may vary considerably from
actual results. All such estimates are to some degree uncertain, and
classifications of reserves are only attempts to define the degree of
uncertainty involved. For these reasons, estimates of the economically
recoverable oil and gas reserves attributable to any particular group of
properties and classification of such reserves based on risk of recovery,
prepared by different engineers or by the same engineers at different times, may
vary substantially. Our actual production, revenues, taxes and development and
operating expenditures with respect to our reserves may vary from such
estimates.
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Estimates with respect to reserves that may be developed and produced in the
future are often based upon volumetric calculations and upon analogy to similar
types of reserves, rather than upon actual production history. Estimates based
upon these methods generally are less reliable than those based upon actual
production history. Subsequent evaluation of the same reserves based upon
production history will result in variations in the estimated reserves.
WE DO NOT OPERATE ALL OF OUR PROPERTIES AND ASSETS.
Other companies operate some of the assets in which we have interests. As a
result, we will have limited ability to exercise influence over operations of
these assets or their associated costs, which could adversely affect our
financial performance. The success and timing of our activities on assets
operated by others will therefore depend upon a number of factors that may be
outside of our control, including the timing and amount of capital expenditures,
the operator's expertise and financial resources, the approval of other
participants, the selection of technology and the risk management practices.
OUR BUSINESS IS SUBJECT TO ENVIRONMENTAL LEGISLATION IN ALL JURISDICTIONS IN
WHICH WE OPERATE AND ANY CHANGES IN SUCH LEGISLATION COULD NEGATIVELY AFFECT OUR
RESULTS OF OPERATIONS.
All phases of the oil and gas business are subject to environmental
regulation under a variety of Canadian, U.S., and other foreign, federal,
provincial, territorial, state and municipal laws and regulations (collectively,
"environmental legislation").
Environmental legislation imposes, among other things, restrictions,
liabilities and obligations in connection with the generation, handling, use,
storage, transportation, treatment and disposal of hazardous substances and
waste and in connection with spills, releases and emissions of various
substances to the environment. Environmental legislation also requires that
wells, facility sites and other properties associated with our operations be
operated, maintained, abandoned and reclaimed to the satisfaction of applicable
regulatory authorities. In addition, certain types of operations, including
exploration and development projects and changes to certain existing projects,
may require the submission and approval of environmental impact assessments or
permit applications. Compliance with environmental legislation can require
significant expenditures, including expenditures for clean up costs and damages
arising out of contaminated properties, and failure to comply with environmental
legislation may result in the imposition of fines and penalties. Additionally,
our business is subject to the trend towards increased civil liability for
environmental matters (such as the ability of private parties to commence
actions, new theories of liability and new heads of damages). Although it is not
expected that the costs of complying with environmental legislation or dealing
with environmental civil liabilities will have a material adverse effect on our
financial condition or results of operations, no assurance can be made that the
costs of complying with environmental legislation in the future will not have
such an effect.
In 1994, the United Nations' Framework Convention on Climate Change came
into force and three years later led to the Kyoto Protocol which requires
nations to reduce their emissions of carbon dioxide and other greenhouse gases.
Canada ratified the Kyoto Protocol in December 2002. Reductions in greenhouse
gases from our operations may be required which could result in increased
capital expenditures. It is expected that other changes in environmental
legislation may also require, among other things, reductions in emissions to the
air from our operations and result in increased capital expenditures. Although
it is not expected that future changes in environmental legislation will result
in materially increased costs, such changes could occur and result in stricter
standards and enforcement, larger fines and liability, and increased capital
expenditures and operating costs, which could have an adverse effect on our
financial condition or results of operations.
OUR OPERATIONS ARE SUBJECT TO BUSINESS INTERRUPTION AND CASUALTY LOSSES.
Our business is subject to all of the operating risks normally associated
with the exploration for and production of oil and gas and the operation of
midstream facilities. These risks include blowouts,
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explosions, fire, gaseous leaks, migration of harmful substances and oil spills,
any of which could cause personal injury, result in damage to, or destruction
of, oil and gas wells or formations or production facilities and other property,
equipment and the environment, as well as interrupt operations. In addition, all
of our operations are subject to all of the risks normally incident to the
transportation, processing and storing of oil, gas and other related products,
drilling of oil and gas wells, and the operation and development of oil and gas
properties, including encountering unexpected formations or pressures, premature
declines of reservoirs, blowouts, equipment failures and other accidents, sour
gas releases, uncontrollable flows of oil, gas or well fluids, adverse weather
conditions, pollution and other environmental risks. The occurrence of a
significant event if it were to exceed or be excluded from our insurance
coverage could have a material adverse effect on our financial position.
THE DEBT SECURITIES WILL BE SUBORDINATED TO CREDITORS OF OUR SUBSIDIARIES AND
PARTNERSHIPS.
The debt securities will be effectively subordinated to creditors of our
subsidiaries and partnerships, in that our right to participate as a stockholder
or partner in the distribution of the assets of any subsidiary or partnership,
as the case may be, upon any such distribution would be subject to the prior
claims of the creditors of such subsidiary or partnership, as the case may be.
OUR FOREIGN OPERATIONS WILL EXPOSE US TO RISKS FROM ABROAD WHICH COULD
NEGATIVELY AFFECT OUR RESULTS OF OPERATIONS.
Some of our foreign operations involve risk typically associated with
investments in developing countries, such as uncertain political, economic,
legal and tax environments. These risks may include, among other things,
currency restrictions and exchange rate fluctuations, loss of revenue, property
and equipment as a result of hazards such as expropriation, nationalization,
war, insurrection and geopolitical and other political risks, risks of increases
in taxes and governmental royalties, renegotiation of contracts with
governmental entities and quasi-governmental agencies, changes in laws and
policies governing operations of foreign-based companies and other uncertainties
arising out of foreign government sovereignty over our international operations.
In addition, if a dispute arises in our foreign operations, we may be subject to
the exclusive jurisdiction of foreign courts or may not be successful in
subjecting foreign persons to the jurisdiction of a court in the United States
or Canada.
Our private ownership of oil and gas properties in Canada differs distinctly
from our ownership interests in foreign oil and gas properties. In some foreign
countries in which we do and may do business in the future, the state generally
retains ownership of the minerals and consequently retains control of, and in
many cases participates in, the exploration and production of reserves.
Accordingly, operations outside of Canada may be materially affected by host
governments through royalty payments, export taxes and regulations, surcharges,
value added taxes, production bonuses and other charges. In addition, changes in
prices and costs of operations, timing of production and other factors may
affect estimates of oil and gas reserve quantities and future net cash flows
attributable to foreign properties in a manner materially different from the
manner in which such changes would affect estimates for Canadian properties.
Agreements covering foreign oil and gas operations also frequently contain
provisions obligating us to spend specified amounts on exploration and
development or to perform certain operations, or forfeit all or a portion of the
acreage subject to the contract. Petro-Canada has operations in Libya and
Venezuela, who are members of the Organization of Petroleum Exporting Countries
(OPEC), and may operate in other OPEC-member countries in the future. Production
in those countries is constrained from time to time by OPEC quotas.
CHANGES IN GOVERNMENTAL REGULATION AFFECTING THE OIL AND GAS INDUSTRY COULD HAVE
A MATERIAL ADVERSE IMPACT ON US.
The petroleum industry is subject to regulation and intervention by
governments in such matters as the awarding of exploration and production
interests, the imposition of specific drilling obligations, environmental
protection controls, control over the development and abandonment of fields
30
<Page>
(including restrictions on production) and, possibly, expropriation or
cancellation of contract rights. As well, governments may regulate or intervene
with respect to price, taxes, royalties and the exportation of oil and gas. Such
regulations may be changed from time to time in response to economic or
political conditions. The implementation of new regulations or the modification
of existing regulations affecting the oil and gas industry could reduce demand
for gas and crude oil, increase our costs and may have a material adverse impact
on us.
FLUCTUATIONS IN EXCHANGE RATES COULD GIVE RISE TO FOREIGN CURRENCY EXPOSURE.
In Petro-Canada's downstream operations, crude oil feedstock costs are
generally set in US dollars, while sales of refined products are primarily in
Canadian dollars. Revenues, expenses, capital expenditures and related net
assets of our operations outside of Canada are primarily denominated in US
dollars. The other major currencies in which we operate are euros and British
pounds sterling. Fluctuations in exchange rates between the US and Canadian
dollar, and between the US or Canadian dollar and other foreign currencies,
could have an adverse effect on our financial condition.
YOU WILL NOT BE ABLE TO RECOVER DAMAGES FROM ARTHUR ANDERSEN LLP WITH RESPECT TO
THEIR AUDIT REPORT WHICH IS INCORPORATED INTO THIS PROSPECTUS.
In connection with this offering, we would normally be required to obtain a
written consent from Arthur Andersen LLP, independent public accountants, to our
incorporation into this prospectus of their audit report covering our audited
financial statements as at December 31, 2001 and for the fiscal years ended
December 31, 2001 and 2000, and to file that consent with the ASC and with the
SEC as an exhibit to the registration statement of which this prospectus
forms a part. However, on June 3, 2002, Arthur Andersen LLP, which was an
Ontario limited liability partnership separate from Arthur Andersen LLP in the
U.S., ceased to practice public accounting in Canada, including at its Calgary,
Canada office, from which we were primarily serviced. As a consequence,
representatives of Arthur Andersen LLP are no longer available to provide a
consent in connection with the filing of this prospectus with the ASC and the
filing of the registration statement with the SEC. We filed our prospectus in
Canada in reliance on a staff notice of the Canadian Securities Administrators
and we filed our registration statement with the SEC in reliance on an SEC rule,
each of which relieve an issuer from the obligation to obtain Arthur
Andersen LLP consents in certain cases. As a result of Arthur Andersen LLP not
having provided its consent, you will not be able to recover damages from Arthur
Andersen LLP under Canadian or United States securities legislation with respect
to its audit report. Furthermore, Arthur Andersen LLP may not possess sufficient
assets to satisfy any claims that may arise out of Arthur Andersen LLP's audit
of our financial statements.
LEGAL MATTERS
Unless otherwise specified in a prospectus supplement relating to a series
of debt securities, certain legal matters will be passed upon for us by Fraser
Milner Casgrain LLP, Calgary, Alberta, and by Torys LLP, New York, New York. As
to all matters of Canadian federal and Alberta law, Torys LLP may rely upon the
opinion of Fraser Milner Casgrain LLP. As to all matters of U.S. federal and
New York law, Fraser Milner Casgrain LLP may rely upon the opinion of
Torys LLP. Certain legal matters relating to U.S. law will be passed upon for
the underwriters by Paul, Weiss, Rifkind, Wharton & Garrison LLP, New York,
New York.
The partners and associates of Fraser Milner Casgrain LLP and Torys LLP as a
group beneficially own, directly or indirectly, less than 1% of our outstanding
securities.
EXPERTS
Our consolidated financial statements as at and for the fiscal year ended
December 31, 2002 incorporated by reference into this prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as set forth in their
report (which report expresses an unqualified opinion on our 2002 consolidated
financial statements and includes an explanatory paragraph concerning the
31
<Page>
application of procedures relating to certain adjustments of financial statement
amounts related to the 2001 and 2000 consolidated financial statements that were
audited by other auditors who have ceased operations) which is incorporated by
reference herein and has been so incorporated in reliance upon the report of
such firm given their authority as experts in auditing and accounting.
The consolidated financial statements for 3908968 Canada Inc. as at
December 31, 2002 and for the period May 2, 2002 to December 31, 2002 and the
consolidated statement of earnings and consolidated statement of cash flows of
Veba Oil & Gas for the period January 1, 2002 to May 1, 2002 included in this
prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
set forth in their report included herein and has been so included in reliance
upon the report of such firm given their authority as experts in auditing and
accounting.
Our financial statements incorporated by reference into this prospectus as
at and for the fiscal year ended December 31, 2001 have been audited by Arthur
Andersen LLP, as indicated in their report with respect thereto, and are
incorporated in this prospectus in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports. Because Arthur
Andersen LLP ceased to practice public accounting in Canada on June 3, 2002, we
are not able to obtain the consent of Arthur Andersen LLP to the incorporation
of their report into this prospectus. As a result, you will not be able to
recover against Arthur Andersen LLP under Canadian or United States securities
laws for any untrue statements of material fact contained in the financial
statements audited by Arthur Andersen LLP or any omissions to state a material
fact required to be stated therein. Furthermore, Arthur Andersen LLP may not
possess sufficient assets to satisfy any claims that may arise out of Arthur
Andersen LLP's audit of our financial statements. Please read "Where You Can
Find More Information" and "Risk Factors--You will not be able to recover
damages from Arthur Andersen LLP with respect to their audit report which is
incorporated into this prospectus".
DOCUMENTS FILED AS PART OF THE U.S. REGISTRATION STATEMENT
The following documents have been filed with the SEC as part of the
registration statement of which this prospectus is a part:
- the documents listed in the fourth paragraph under "Where You Can Find
More Information" in this prospectus;
- consents of accountants and counsel;
- powers of attorney from our directors and officers;
- the trust indenture relating to the debt securities;
- statement of eligibility of the trustee on Form T-1; and
- interest coverage ratios.
32
<Page>
INDEX TO FINANCIAL STATEMENTS
<Table>
<Caption>
PAGE NO.
--------
VEBA OIL & GAS BUSINESS
Auditors' Report............................................ F-2
Consolidated Statement of Earnings.......................... F-3
Consolidated Statement of Retained Earnings................. F-3
Consolidated Statement of Cash Flows........................ F-4
Consolidated Balance Sheet.................................. F-5
Notes to Consolidated Financial Statements.................. F-6
PRO FORMA PETRO-CANADA
Compilation Report.......................................... F-15
Pro Forma Consolidated Statement of Earnings................ F-16
Notes to Pro Forma Consolidated Statement of Earnings....... F-17
</Table>
F-1
<Page>
AUDITORS' REPORT
To the Directors of Petro-Canada:
We have audited the consolidated balance sheet of 3908968 Canada Inc. as at
December 31, 2002 and the consolidated statements of earnings, retained earnings
and cash flows for the period May 2, 2002 to December 31, 2002 and the
consolidated statements of earnings and cash flows of Veba Oil & Gas for the
period January 1, 2002 to May 1, 2002. These financial statements are the
responsibility of 3908968 Canada Inc.'s management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with Canadian generally accepted
auditing standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of 3908968 Canada Inc. as at
December 31, 2002 and the results of its operations and its cash flows for the
period May 2, 2002 to December 31, 2002 and the results of operations and cash
flows of Veba Oil & Gas for the period January 1, 2002 to May 1, 2002 in
accordance with Canadian generally accepted accounting principles.
As described in Note 1 to the Consolidated Financial Statements, effective
May 2, 2002 Petro-Canada, through its wholly-owned subsidiary 3908968
Canada Inc., acquired the shares of the companies holding the majority of the
international oil and gas operations of Veba Oil & Gas GmbH. As a result of the
acquisition, the consolidated financial information of 3908968 Canada Inc. is
presented on a different cost basis than that of Veba Oil & Gas and therefore is
not comparable.
<Table>
Calgary, Canada (Signed) Deloitte & Touche LLP
April 16, 2003 Chartered Accountants
</Table>
F-2
<Page>
3908968 CANADA INC.
CONSOLIDATED STATEMENT OF EARNINGS
(STATED IN MILLIONS OF CANADIAN DOLLARS)
<Table>
<Caption>
3908968 CANADA INC. VEBA OIL & GAS
MAY 2, 2002 TO JANUARY 1, 2002 TO
DECEMBER 31, 2002 MAY 1, 2002
-------------------- -------------------
(NOTE 1)
REVENUE..................................................... $1 226 $ 553
------ ------
EXPENSES
Operating and general....................................... 281 153
Exploration................................................. 25 16
Depreciation, depletion and amortization.................... 244 94
Foreign currency translation (Note 3)....................... 202 (3)
Interest.................................................... 12 3
------ ------
764 263
------ ------
EARNINGS BEFORE INCOME TAXES................................ 462 290
------ ------
PROVISION FOR INCOME TAXES
Current..................................................... 419 132
Future...................................................... 10 (15)
------ ------
429 117
------ ------
NET EARNINGS................................................ $ 33 $ 173
====== ======
</Table>
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
(STATED IN MILLIONS OF CANADIAN DOLLARS)
<Table>
<Caption>
3908968 CANADA INC.
MAY 2, 2002 TO
DECEMBER 31, 2002
--------------------
RETAINED EARNINGS AT MAY 2, 2002............................ $ -
Net earnings................................................ 33
------
RETAINED EARNINGS AT DECEMBER 31, 2002...................... $ 33
======
</Table>
F-3
<Page>
3908968 CANADA INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(STATED IN MILLIONS OF CANADIAN DOLLARS)
<Table>
<Caption>
3908968 CANADA INC. VEBA OIL & GAS
MAY 2, 2002 TO JANUARY 1, 2002 TO
DECEMBER 31, 2002 MAY 1, 2002
-------------------- -------------------
(NOTE 1)
OPERATING ACTIVITIES
Net earnings................................................ $ 33 $ 173
Items not affecting cash flow (Note 4)...................... 495 76
Exploration expenses (Note 8)............................... 25 16
------- -------
Cash flow................................................... 553 265
Increase in non-cash working capital related to operating
activities and other (Note 5)............................. (90) (139)
------- -------
Cash flow from operating activities......................... 463 126
------- -------
INVESTING ACTIVITIES
Acquisition of oil and gas operations of
Veba Oil & Gas GmbH (Note 1).............................. (2 234) -
Expenditures on property, plant and equipment and
exploration (Note 8)...................................... (171) (144)
------- -------
(2 405) (144)
------- -------
FINANCING ACTIVITIES
Proceeds of loans from affiliated company................... 1 354 -
Reduction of loans from affiliated company.................. (247) (48)
Proceeds from issue of common shares........................ - 48
Capital contribution from parent (Note 11).................. 904 -
------- -------
2 011 -
------- -------
INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS...... 69 (18)
CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF PERIOD...... - 33
------- -------
CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD............ $ 69 $ 15
======= =======
</Table>
F-4
<Page>
3908968 CANADA INC.
CONSOLIDATED BALANCE SHEET
(STATED IN MILLIONS OF CANADIAN DOLLARS)
<Table>
<Caption>
DECEMBER 31,
2002
-------------
ASSETS
CURRENT ASSETS
Cash and short-term investments (Note 6).................... $ 69
Accounts receivable......................................... 584
Inventories (Note 7)........................................ 72
Prepaid expenses............................................ 7
Advances to affiliated company.............................. 12
------
744
PROPERTY, PLANT AND EQUIPMENT, NET (Note 8)................. 1 910
GOODWILL (Note 1)........................................... 709
DEFERRED CHARGES AND OTHER ASSETS........................... 6
------
$3 369
======
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities.................... $ 304
Income taxes payable........................................ 243
Advances from affiliated company............................ 37
------
584
LOANS FROM AFFILIATED COMPANY (Note 9)...................... 1 246
DEFERRED CREDITS AND OTHER LIABILITIES (Note 10)............ 149
FUTURE INCOME TAXES......................................... 453
COMMITMENTS AND CONTINGENT LIABILITIES (Note 15)
SHAREHOLDER'S EQUITY (Note 11).............................. 937
------
$3 369
======
</Table>
F-5
<Page>
3908968 CANADA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS STATED IN MILLIONS OF CANADIAN DOLLARS)
1. BASIS OF PRESENTATION
On May 2, 2002 Petro-Canada, through 3908968 Canada Inc. ("3908968"), a
wholly-owned subsidiary, acquired the shares of the companies holding the
majority of the international oil and gas operations of Veba Oil & Gas GmbH
(collectively, "Veba Oil & Gas") and on December 10, 2002 acquired certain of
the remaining Veba Oil & Gas operations which were subject to rights of first
refusal. The total acquisition cost, consisting of cash consideration and
acquisition costs, was $2 234 million and the results of these operations have
been included in the consolidated financial statements from the dates of
acquisition. The remaining operations not yet acquired are in Venezuela and are
subject to rights of first refusal.
The acquisition was accounted for by the purchase method of accounting and
the estimated allocation of fair value to the assets acquired and liabilities
assumed was:
<Table>
Property, plant and equipment............................... $2 012
Goodwill.................................................... 709
Current assets, excluding cash of $15 million............... 640
Deferred charges and other assets........................... 6
------
Total assets acquired..................................... 3 367
------
Current liabilities......................................... 634
Future income taxes......................................... 387
Deferred credits and other liabilities...................... 112
------
Total liabilities assumed................................. 1 133
------
Net assets acquired......................................... $2 234
======
</Table>
Although the estimated allocation of fair value to the assets acquired and
liabilities assumed is subject to changes as additional information becomes
available, the final allocation is not expected to differ materially from the
estimated allocation. Funds for the acquisition were provided from loans from an
affiliated company (Note 9) and from cash and short-term investments.
As a consequence of the acquisition, 3908968's consolidated financial
statements reflect a change in the basis of accounting for the assets and
liabilities to reflect fair values resulting from the Veba Oil & Gas
acquisition. The accompanying consolidated financial statements for the period
prior to May 2, 2002 do not include the effects resulting from the acquisition.
Accordingly, the consolidated financial statements of Veba Oil & Gas are not
comparable with the consolidated financial statements of 3908968. Further, the
consolidated statement of earnings and other financial information of 3908968
differs from the Upstream International segment results presented in the notes
to the consolidated financial statements of Petro-Canada for the year ended
December 31, 2002. The segment results in the 2002 Petro-Canada financial
statements include certain international subsidiaries and operations that were
not acquired as part of the acquisition described above.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3908968 is a wholly-owned subsidiary of Petro-Canada, a public company with
shares listed on the Toronto and New York Stock Exchanges.
The consolidated financial statements of 3908968 and Veba Oil & Gas ("the
Companies") are prepared by management in accordance with Canadian generally
accepted accounting principles.
F-6
<Page>
3908968 CANADA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR AMOUNTS STATED IN MILLIONS OF CANADIAN DOLLARS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses and the disclosure of contingencies. Such
estimates primarily relate to unsettled transactions and events as of the date
of the financial statements. Accordingly, actual results may differ from
estimated amounts as future confirming events occur.
(a) CONSOLIDATION
The consolidated financial statements of the Companies include the accounts
of each company and their respective subsidiaries. Substantially all exploration
and development activities are conducted jointly with others. Only the
proportionate interest in such activities is reflected in the consolidated
financial statements.
(b) REVENUE RECOGNITION
Revenue from the sale of crude oil, natural gas and natural gas liquids is
recorded when title passes to the customer.
Operations conducted pursuant to exploration and production sharing
agreements ("EPSA's") are reflected in the consolidated financial statements
based on the working interest in such operations. Under the EPSA's, all
operating and capital costs for exploring and developing the concessions are
paid by the Companies and other non-governmental partners. Each EPSA establishes
specific terms for the Companies to recover these costs ("Cost Recovery Oil") in
accordance with a formula that is generally limited to a specified percentage of
production during each fiscal year and to share in the production profits
("Profit Oil"). Profit Oil is that portion of production remaining after
deducting Cost Recovery Oil and is shared between the joint venture partners and
the government of each country, varying with the level of production. Profit Oil
that is attributable to the government includes an amount in respect of all
deemed income taxes payable by the Companies under the laws of the respective
country. All other government stakes, other than income taxes, are considered to
be royalty interests.
(c) FOREIGN CURRENCY TRANSLATION
Monetary assets and liabilities are translated into Canadian dollars at
rates of exchange in effect at the balance sheet date. Other assets and related
depreciation, depletion and amortization, other liabilities, revenue and other
expense items are translated at rates of exchange in effect at the respective
transaction dates. The resulting exchange gains or losses are included in
earnings.
Foreign operations are integrated with the Companies' other activities and
are translated in the manner described above.
(d) INCOME TAXES
Income taxes are accounted for using the liability method. Under this
method, future income taxes are recognized, using substantively enacted income
tax rates, based on the differences between the carrying amounts of assets and
liabilities reported in the financial statements and their respective tax bases.
The effect of a change in income tax rates on future income tax assets and
liabilities is recognized in income in the period the change occurs.
F-7
<Page>
3908968 CANADA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR AMOUNTS STATED IN MILLIONS OF CANADIAN DOLLARS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(e) CASH AND SHORT-TERM INVESTMENTS
Cash and short-term investments comprise cash in banks, less outstanding
cheques, and deposits with a maturity of less than ninety days when purchased.
(f) INVENTORIES
Inventories are stated at the lower of cost and net realizable value.
(g) PROPERTY, PLANT AND EQUIPMENT
Investments in exploration and development activities are accounted for on
the successful efforts method. Under this method the acquisition cost of
unproved acreage is capitalized. Costs of exploratory wells are initially
capitalized pending determination of proved reserves and costs of wells which
are assigned proved reserves remain capitalized while costs of unsuccessful
wells are charged to earnings. All other exploration costs, including geological
and geophysical costs, are charged to earnings as incurred. Development costs,
including the cost of all wells, are capitalized.
Producing properties and significant unproved properties are assessed
annually, or as economic events dictate, for potential impairment. Impairment is
assessed by comparing the estimated net undiscounted future cash flows to the
carrying value of the asset.
(h) DEPRECIATION, DEPLETION AND AMORTIZATION
Depreciation and depletion of capitalized costs of oil and gas producing
properties are calculated using the unit of production method.
Depreciation of other plant and equipment is provided on either the unit of
production method or the straight line method, based on the estimated service
lives of the related assets, as appropriate.
Costs associated with significant development projects are not depleted
until commencement of commercial production.
(i) FUTURE REMOVAL AND SITE RESTORATION COSTS
Estimated future removal and site restoration costs which are probable and
can be reasonably determined are provided for on either the unit of production
method or the straight line method, based on the estimated service lives of the
related assets, as appropriate. The annual provision is included in operating
and general expenses and is estimated based on current costs and technology and
in accordance with existing legislation and industry practice.
(j) GOODWILL
Goodwill is the excess purchase price over the fair value of identifiable
assets and liabilities acquired. Goodwill impairment is assessed annually, or as
economic events dictate, by comparing the fair value of 3908968 to its carrying
value, including goodwill. If the fair value of the reporting unit is less than
its carrying value, a goodwill impairment loss is recognized as the excess of
the carrying value of the goodwill over the fair value of the goodwill.
F-8
<Page>
3908968 CANADA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR AMOUNTS STATED IN MILLIONS OF CANADIAN DOLLARS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(k) EMPLOYEE FUTURE BENEFITS
Obligations under employee benefit plans are recorded net of plan assets
where applicable. The costs of pension benefits are actuarially determined using
the projected benefit method prorated based on service and using management's
best estimate of expected plan investment performance, salary escalation and
retirement ages of employees. For the purpose of calculating the expected return
on plan assets, those assets are measured at fair value. The accrued benefit
obligation is discounted using a market rate of interest at the beginning of the
year on high quality corporate debt instruments.
(l) HEDGING AND DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments may be used to manage the exposure to
market risks resulting from fluctuations in foreign exchange rates, interest
rates, and commodity prices. These derivative financial instruments are not used
for trading or speculative purposes.
Gains and losses on derivative instruments that are designated as and
determined to be effective hedges are deferred and recognized in the period of
settlement as a component of the related transaction. If a derivative instrument
ceases to be effective, hedge accounting is terminated and future gains or
losses are recognized in the statement of earnings in the current period.
Derivative instruments that are not hedges for accounting purposes are recorded
at fair value with any resulting gain or loss recognized in the statement of
earnings in the current period.
3. FOREIGN CURRENCY TRANSLATION
Loss on translation consists of:
<Table>
<Caption>
3908968 CANADA INC. VEBA OIL & GAS
MAY 2, 2002 TO JANUARY 1, 2002 TO
DECEMBER 31, 2002 MAY 1, 2002
-------------------- --------------------
(NOTE 1)
Loss (gain) on translation of foreign currency
denominated loans from affiliated company........... $139 $ (3)
Loss on translation of subsidiaries................... 63 -
---- ----
$202 $ (3)
==== ====
</Table>
F-9
<Page>
3908968 CANADA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR AMOUNTS STATED IN MILLIONS OF CANADIAN DOLLARS)
4. ITEMS NOT AFFECTING CASH FLOW
<Table>
<Caption>
3908968 CANADA INC. VEBA OIL & GAS
MAY 2, 2002 TO JANUARY 1, 2002 TO
DECEMBER 31, 2002 MAY 1, 2002
-------------------- -------------------
(NOTE 1)
Depreciation, depletion and amortization.............. $244 $ 94
Future income taxes................................... 10 (15)
Provision for future removal and site restoration
costs............................................... 11 9
Loss (gain) on translation of foreign currency
denominated loans from affiliated company........... 139 (3)
Foreign currency losses (gains)....................... 90 (10)
Other................................................. 1 1
---- ----
$495 $ 76
==== ====
</Table>
5. INCREASE IN NON-CASH WORKING CAPITAL AND OTHER
<Table>
<Caption>
3908968 CANADA INC. VEBA OIL & GAS
MAY 2, 2002 TO JANUARY 1, 2002 TO
DECEMBER 31, 2002 MAY 1, 2002
-------------------- -------------------
(NOTE 1)
OPERATING ACTIVITIES AND OTHER
Accounts receivable................................... $(13) $ (74)
Inventories........................................... (16) (22)
Prepaid expenses...................................... 6 (9)
Advances to affiliated company........................ (12) 250
Accounts payable and accrued liabilities.............. 13 (369)
Income taxes payable.................................. (99) 75
Advances from affiliated company...................... 37 4
Other................................................. (6) 6
---- -----
$(90) $(139)
==== =====
</Table>
Non-cash working capital is comprised of current assets and current
liabilities other than cash and short-term investments.
F-10
<Page>
3908968 CANADA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR AMOUNTS STATED IN MILLIONS OF CANADIAN DOLLARS)
6. CASH AND SHORT-TERM INVESTMENTS
Short-term investments are considered to be cash equivalents and are
recorded at cost, which approximates market value.
<Table>
<Caption>
DECEMBER 31,
2002
-------------
Cash........................................................ $ 69
Short-term investments...................................... -
------
$ 69
======
</Table>
Cash payments for interest and income taxes were as follows:
<Table>
<Caption>
3908968 CANADA INC. VEBA OIL & GAS
MAY 2, 2002 TO JANUARY 1, 2002
DECEMBER 31, 2002 TO MAY 1, 2002
-------------------- ----------------
(NOTE 1)
Interest................................................ $ 10 $ -
Income taxes............................................ $ 443 $ 78
</Table>
7. INVENTORIES
<Table>
<Caption>
DECEMBER 31,
2002
-------------
Crude oil................................................... $ 8
Materials and supplies...................................... 64
------
$ 72
======
</Table>
8. PROPERTY, PLANT AND EQUIPMENT
<Table>
<Caption>
DECEMBER 31,
2002
-------------
Cost........................................................ $2 150
Accumulated depreciation, depletion and amortization........ 240
------
Net......................................................... $1 910
------
Capital expenditures........................................ $ 146
======
</Table>
Property, plant and equipment costs of $479 million (May 1,
2002 - $91 million) are not currently being depleted. No interest was
capitalized during 2002.
Exploration expenses of $25 million for the period May 2, 2002 to
December 31, 2002 (January 1, 2002 to May 1, 2002 - $16 million) charged to
earnings are reclassified from operating activities and included with capital
expenditures under investing activities in the consolidated statement of cash
flows.
F-11
<Page>
3908968 CANADA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR AMOUNTS STATED IN MILLIONS OF CANADIAN DOLLARS)
9. LOANS FROM AFFILIATED COMPANY
In connection with the acquisition of Veba Oil & Gas, 3908968 entered into
loan agreements with an affiliated company. The terms of the loans are five
years, with repayments to be made at the option of 3908968. The loans,
denominated in both euros and US dollars, pay interest annually or semi-annually
using the one-month or six-month LIBOR-rate as quoted by the British Bankers
Association. Certain of the loans, in the amount of $816 million as of
December 31, 2002, do not accrue interest until January 1, 2003. In the period
May 2, 2002 to December 31, 2002, 3908968 repaid $247 million of these loans.
Prior to May 2, 2002 Veba Oil & Gas had $229 million of loans outstanding
with a company affiliated to Veba Oil & Gas GmbH for the development of certain
oilfields. These loans were assumed by a company affiliated with Petro-Canada as
part of the acquisition of Veba Oil & Gas.
Interest expense on loans from an affiliated company was $9 million for the
period May 2, 2002 to December 31, 2002 (January 1, 2002 to May 1,
2002 - $2 million).
10. DEFERRED CREDITS AND OTHER LIABILITIES
<Table>
<Caption>
DECEMBER 31,
2002
-------------
Future removal and site restoration costs................... $141
Other....................................................... 8
----
$149
====
</Table>
11. SHAREHOLDER'S EQUITY
<Table>
<Caption>
DECEMBER 31,
2002
-------------
Common shares............................................... $ -
Contributed surplus......................................... 904
Retained earnings........................................... 33
----
$937
====
</Table>
3908968 was incorporated on June 12, 2001 and issued one common share to its
parent for proceeds of $1. On April 30, 2002, 3908968 received a capital
contribution of $904 million from its parent, which was recorded as contributed
surplus. The authorized share capital is comprised of an unlimited number of
common shares.
F-12
<Page>
3908968 CANADA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR AMOUNTS STATED IN MILLIONS OF CANADIAN DOLLARS)
12. EMPLOYEE FUTURE BENEFITS
Pension plans with defined benefit and defined contribution provisions are
maintained. The actuarially determined cost of these benefits is accrued over
the estimated service life of employees. The defined benefit provisions are
generally based upon years of service and average salary during the final years
of employment. Certain defined benefit options require employee contributions
and the balance of the funding for the registered plans is provided by the
Companies, based upon the advice of an independent actuary. The defined
contribution option provides for an annual contribution of 5.25% of each
participating employee's pensionable earnings. Substantially all of the pension
assets are invested in equity, fixed income and other marketable securities.
BENEFIT PLAN EXPENSE
<Table>
<Caption>
3908968 CANADA INC. VEBA OIL & GAS
MAY 2, 2002 TO JANUARY 1, 2002 TO
DECEMBER 31, 2002 MAY 1, 2002
-------------------- -------------------
(NOTE 1)
(a) Defined benefit plans................................... $ 2 $ -
(b) Defined contribution plans.............................. - -
--- ---
Total expense............................................... $ 2 $ -
=== ===
</Table>
FINANCIAL STATUS OF DEFINED BENEFIT PLANS
<Table>
<Caption>
DECEMBER 31,
2002
-------------
Fair value of plan assets................................... $ 26
Accrued benefit obligation.................................. 41
----
Funded status - plan deficit................................ (15)
====
Accrued benefit liability................................... $ (8)
====
</Table>
All the pension plans of 3908968 are in a plan deficit position and included
in the funded status information above.
CONTRIBUTIONS AND BENEFITS PAID
<Table>
<Caption>
DECEMBER 31,
2002
-------------
Contributions............................................... $ 3
===
Benefits paid............................................... $ -
===
</Table>
DEFINED BENEFIT PLAN ASSUMPTIONS
<Table>
Year-end obligation discount rate........................... 5.5%
Long-term rate of return on plan assets..................... 7.0%
Rate of compensation increase, excluding merit increases.... 3.7%
</Table>
F-13
<Page>
3908968 CANADA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR AMOUNTS STATED IN MILLIONS OF CANADIAN DOLLARS)
13. FINANCIAL INSTRUMENTS
Exposure to market risks in the normal course of business results from
fluctuations in commodity prices, foreign exchange rates and interest rates. The
exposure to market fluctuations is monitored and derivative instruments may be
used, as appropriate, to manage these risks. These derivative instruments are
entered into solely for hedging purposes. As at December 31, 2002, there were no
derivative instruments outstanding.
Derivative instruments involve a degree of credit risk. This risk is
controlled through the establishment of credit policies and limits which are
applied in the selection of counterparties. Market risk relating to changes in
value or settlement cost of the derivative instruments is essentially offset by
gains or losses on the hedged positions.
The fair value of financial instruments included in current assets and
current liabilities, amounting to $324 million, approximates the carrying amount
of these instruments due to their short maturity. The fair value of loans from
an affiliated company approximates the carrying amount due to their short
maturity and floating rate of interest.
14. RELATED PARTY TRANSACTIONS
Terms with respect to the loans from an affiliated company are described in
Note 9 to the consolidated financial statements. Other transactions with
affiliated companies, which are nominal, are in the normal course of business
and are on the same terms as those accorded to non-related parties.
15. COMMITMENTS AND CONTINGENT LIABILITIES
(a) 3908968 has leased property and equipment under various long-term
operating leases. The minimum annual rentals for non-cancellable
operating leases are estimated at $3 million in 2003, $2 million in 2004
and 2005, $0.4 million in 2006 and 2007 and $4 million in aggregate
thereafter.
(b) 3908968 is involved in litigation and claims associated with normal
operations. Management is of the opinion that any resulting settlements
would not materially affect the financial position of 3908968.
16. SUBSEQUENT EVENT
As a result of changes in economic and operating circumstances relating to
3908968's assets in Kazakhstan subsequent to December 31, 2002, a charge of
$46 million ($46 million after-tax) has been recorded at March 31, 2003 relating
to the impairment of these assets, which are included in property, plant and
equipment at December 31, 2002.
F-14
<Page>
PETRO-CANADA
PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
COMPILATION REPORT
To the Directors of Petro-Canada:
We have reviewed, as to compilation only, the accompanying pro forma
consolidated statement of earnings of Petro-Canada for the year ended
December 31, 2002. This pro forma consolidated statement of earnings has been
prepared solely for inclusion in the prospectus dated May 14, 2003 of
Petro-Canada. In our opinion, the pro forma consolidated statement of earnings
has been properly compiled to give effect to the transactions and assumptions
described in the notes thereto.
<Table>
Calgary, Canada (Signed) Deloitte & Touche LLP
May 14, 2003 Chartered Accountants
</Table>
COMMENTS FOR UNITED STATES READERS ON DIFFERENCES BETWEEN
CANADIAN AND UNITED STATES REPORTING STANDARDS
The above opinion, provided solely pursuant to Canadian requirements, is
expressed in accordance with standards of reporting generally accepted in
Canada. Such standards contemplate the expression of an opinion with respect to
the compilation of pro forma financial statements. United States standards do
not provide for the expression of an opinion on the compilation of pro forma
financial statements. To report in conformity with United States standards on
the reasonableness of the pro forma adjustments and their application to the
pro forma financial statements would require an examination or review which
would be substantially greater in scope than the review as to compilation only
that we have conducted. Consequently, under United States standards, we would be
unable to express any opinion with respect to the compilation of the
accompanying unaudited pro forma consolidated statement of earnings.
<Table>
Calgary, Canada (Signed) Deloitte & Touche LLP
May 14, 2003 Chartered Accountants
</Table>
F-15
<Page>
PETRO-CANADA
PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
(STATED IN MILLIONS OF CANADIAN DOLLARS)
(UNAUDITED)
<Table>
<Caption>
PETRO-CANADA VEBA OIL & GAS PRO FORMA
DECEMBER 31, JANUARY 1, 2002 TO PRO FORMA DECEMBER 31,
2002 MAY 1, 2002 ADJUSTMENTS 2002
------------- ------------------- -------------- -------------
REVENUE.................................. $ 9 917 $ 553 $ (2) 2 (ii) (a) $10 468
------- ------- ------- -------
EXPENSES
Crude oil and product purchases.......... 4 556 - - 4 556
Operating, marketing and general......... 2 036 153 (9) 2 (ii) (b) 2 180
Exploration.............................. 301 16 2 2 (ii) (a) 319
Depreciation, depletion and 2 (ii) (c)
amortization........................... 957 94 12 1 063
Foreign currency translation............. 52 (3) - 49
Interest................................. 187 3 28 2 (ii) (d) 218
------- ------- ------- -------
8 089 263 33 8 385
------- ------- ------- -------
EARNINGS BEFORE INCOME TAXES............. 1 828 290 (35) 2 083
------- ------- ------- -------
PROVISION FOR INCOME TAXES
Current.................................. 959 132 (10) 2 (ii) (e) 1 081
Future................................... (105) (15) 7 2 (ii) (e) (113)
------- ------- ------- -------
854 117 (3) 968
------- ------- ------- -------
NET EARNINGS............................. $ 974 $ 173 $ (32) $ 1 115
======= ======= ======= =======
EARNINGS PER SHARE (dollars)
Basic.................................... $ 3.71 $ 4.24
======= =======
Diluted.................................. $ 3.67 $ 4.20
======= =======
</Table>
See accompanying notes to the pro forma consolidated statement of earnings
F-16
<Page>
PETRO-CANADA
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
DECEMBER 31, 2002
(TABULAR AMOUNTS STATED IN MILLIONS OF CANADIAN DOLLARS)
(UNAUDITED)
1. BASIS OF PRESENTATION
The unaudited pro forma consolidated statement of earnings has been prepared
for inclusion in the prospectus dated May 14, 2003 of Petro-Canada ("the
Company") in accordance with Canadian generally accepted accounting principles.
Accounting policies used in the preparation of the unaudited pro forma
consolidated statement of earnings are in accordance with those used in the
preparation of the audited consolidated financial statements of the Company as
at and for the year ended December 31, 2002.
The unaudited pro forma consolidated statement of earnings for the year
ended December 31, 2002 has been prepared from the audited consolidated
statement of earnings of the Company for the year ended December 31, 2002 and
the audited consolidated statement of earnings representing the international
oil and gas operations of Veba Oil & Gas GmbH (collectively, "Veba Oil & Gas")
for the period January 1, 2002 to May 1, 2002. The unaudited pro forma
consolidated statement of earnings reflects the acquisition of Veba Oil & Gas as
if the transaction had occurred on January 1, 2002. This acquisition was
accounted for by the purchase method of accounting.
In the opinion of management, the unaudited pro forma consolidated statement
of earnings includes all adjustments necessary for fair presentation. No
adjustment has been made to reflect any synergies resulting from the acquisition
of Veba Oil & Gas. The unaudited pro forma consolidated statement of earnings
may not be representative of the results of operations that would have been
realized had the acquisition occurred on such date indicated or of the results
of operations that may be obtained in the future.
The unaudited pro forma consolidated statement of earnings should be read in
conjunction with the audited consolidated financial statements of the Company
for the year ended December 31, 2002 and the audited consolidated financial
statements of 3908968 Canada Inc. for the period May 2, 2002 to December 31,
2002 and Veba Oil & Gas for the period January 1, 2002 to May 1, 2002.
2. PRO FORMA ADJUSTMENTS AND ASSUMPTIONS
The pro forma adjustments are described in the following notes and are based
upon available information and certain assumptions. The unaudited pro forma
consolidated statement of earnings for the year ended December 31, 2002 reflects
the acquisition of Veba Oil & Gas as if the transaction had occurred on
January 1, 2002.
(i) ACQUISITION OF VEBA OIL & GAS
On May 2, 2002 the Company acquired the shares of companies holding the
majority of the international oil and gas operations of Veba Oil & Gas GmbH and
on December 10, 2002 the Company acquired certain of the remaining operations
which were subject to rights of first refusal. The total acquisition cost,
consisting of cash consideration and acquisition costs, was $2 234 million.
F-17
<Page>
PETRO-CANADA
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS (CONTINUED)
DECEMBER 31, 2002
(TABULAR AMOUNTS STATED IN MILLIONS OF CANADIAN DOLLARS)
(UNAUDITED)
2. PRO FORMA ADJUSTMENTS AND ASSUMPTIONS (CONTINUED)
The acquisition was accounted for by the purchase method of accounting and
the estimated allocation of fair value to the assets acquired and liabilities
assumed was:
<Table>
Property, plant and equipment............................... $2 012
Goodwill.................................................... 709
Current assets, excluding cash of $15 million............... 640
Deferred charges and other assets........................... 6
------
Total assets acquired..................................... 3 367
------
Current liabilities......................................... 634
Future income taxes......................................... 387
Deferred credits and other liabilities...................... 112
------
Total liabilities assumed................................. 1 133
------
Net assets acquired......................................... $2 234
======
</Table>
(ii) PRO FORMA STATEMENT OF EARNINGS
The adjustments to the pro forma statement of earnings to reflect the
acquisition of Veba Oil & Gas as if the transaction had occurred on January 1,
2002 are as follows:
(a) Revenue has been decreased by $2 million relating to foreign currency
losses and exploration expense has been increased by $2 million to
reflect the results of the operations acquired December 10, 2002 for the
period May 2, 2002 to December 9, 2002.
(b) Operating, marketing and general expenses have been decreased by
$9 million to reflect the accounting for Veba Oil & Gas future removal
and site restoration costs at fair value for the period January 1, 2002
to May 1, 2002.
(c) Depreciation, depletion and amortization has been increased by
$12 million to reflect the additional depreciation, depletion and
amortization of the higher asset values for the period January 1, 2002 to
May 1, 2002.
(d) Interest expense has been increased by $28 million to reflect the
additional interest expense and amortization of deferred financing costs
related to the acquisition credit facilities for the period January 1,
2002 to May 1, 2002.
(e) The provision for income taxes has been decreased by $3 million as a
result of the items noted above that affect the unaudited pro forma
consolidated statement of earnings.
F-18
<Page>
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[LOGO]
PETRO-CANADA
US $300,000,000 4.00% NOTES DUE 2013
US $300,000,000 5.35% NOTES DUE 2033
------------------
PROSPECTUS SUPPLEMENT
JUNE 17, 2003
---------------------
DEUTSCHE BANK SECURITIES RBC CAPITAL MARKETS
(BOOKRUNNING MANAGER)
------------------------
BANC ONE CAPITAL MARKETS
CITIGROUP
JPMORGAN
BMO NESBITT BURNS
CIBC WORLD MARKETS
SCOTIA CAPITAL
TD SECURITIES
BNP PARIBAS
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