Connacher Oil And Gas Affirms its Commitment to Oil Sands Development



    CALGARY, Oct. 26 /CNW/ - Connacher Oil and Gas Limited (CLL - TSX) notes
that on October 25, 2007 the Government of Alberta announced revisions to the
royalty program for oil sands production that are to become effective on
January 1, 2009. The Government did not grandfather existing oil sands
operations and introduced a price sensitive sliding scale royalty for bitumen
production which, at all price levels for West Texas Intermediate ("WTI")
above US$55.00 per barrel, results in higher royalties for bitumen production
than under the present regime, whether before or after payout. While Connacher
would have preferred to see the existing royalty regime remain in place, given
that it was in part the basis for our original capital investment decisions to
enter oil sands exploration, development and exploitation programs, the
emergence of much higher prices for crude oil appears to be the driving force
for the change. Our conclusion is that Connacher is better off under the
newly-proposed regime than it would have been under the recommendations of the
Royalty Review Panel, at least in the pre-payout period. Furthermore, with the
rapid increase in crude oil prices and assuming that differentials remain
reasonably stable for bitumen, our ultimate netbacks after royalties and
operating costs would be sufficient to generate a respectable, attractive and
competitive rate of return for our oil sands business.
    The new policy will not impair our decision to proceed with continuing
evaluation of our oil sands acreage or with our Algar ("Pod Two") project,
subject to regulatory approval and completion of satisfactory financing
arrangements.
    We do note that the Government of Alberta intends to retain the ring
fence concept, details of which will be more clearly defined. Connacher
heartily endorses this approach, as it will assist companies that have
longer-term reinvestment intentions. We also note that there is a plan to
establish a bitumen valuation methodology, which we also welcome and in which
process we intend to participate, if only to ensure there is not a perverse
application of royalty rates, emanating from the level of West Texas
Intermediate ("WTI"), to bitumen production during periods of high
differentials which can arise due to seasonal and cyclical factors in the
marketplace. Our efforts will be to ensure this is not an application of
improperly high royalties at a time of lower actual realizations for bitumen
production. Connacher continues to believe reliance on market-driven forces is
a more realistic basis for determining fair value, rather than relying upon
values assigned by administrative fiat.

    Connacher Oil and Gas Limited is a public Canadian oil and gas
exploration, production and operating company based in Calgary, Alberta. Its
principal asset is its interest in acreage and its Great Divide Pod One
facility and wells in the Divide region southwest of Fort McMurray, Alberta.
Connacher also holds extensive conventional properties in Alberta and
Saskatchewan, owns a 9,500 bbl/d refinery in Great Falls, Montana and owns a
26 percent equity interest in Petrolifera Petroleum Limited with a current
market value of approximately $200 million.

    Forward-Looking Information: This news release contains certain
"forward-looking information" under applicable securities laws including:
anticipated changes in legislation relating to royalties, the potential
implications of those changes on the Corporation and its future operations and
anticipated development of the Corporation's oil sands properties. Statements
relating to forward-looking information are frequently characterized by words
such as "plan", expect", "project", "intend", "believe", anticipate",
estimate", "may", "potential", "proposed' and other similar words, or
statements that certain events or conditions "may" or "will" occur. These
statements are only predictions. Forward-looking information relating to
changes in royalty legislation is based on publicly available information
presented by the Government of Alberta. The implementation of the proposed
changes to the royalty legislation are subject to certain risks and
uncertainties. The significant changes to the royalty regime require new
legislation, changes to existing legislation and regulation and development of
proprietary software to support the calculation and collection of royalties.
There may be modifications to the proposed royalty structure that are
introduced through legislation. Forward-looking statements relating to the
implication of the proposed royalty changes on the activities of the
Corporation are based on currently available information and the opinions and
estimates of management at the date the statements are made, and are subject
to a variety of risks and uncertainties and other factors that could cause
actual events or results to differ materially from those projected in the
forward-looking statements. These factors include the inherent risks involved
in the exploration and development of oil sands properties, difficulties or
delays in start-up operations, the uncertainties involved in interpreting
drilling results and other geological data, fluctuating oil prices, the
possibility of unanticipated costs and expenses, uncertainties relating to the
availability and costs of financing needed in the future and other factors
including unforeseen delays. As an oil sands enterprise in the development
stage, Connacher faces risks including those associated with exploration,
development, start-up, approvals and the ability to access sufficient capital
from external sources. For a description of the risks and uncertainties facing
Connacher and its business and affairs, readers should refer to Connacher's
Annual Information Form for the year ended December 31, 2006. Connacher
undertakes no obligation to update forward-looking information if
circumstances or management's estimates or opinions should change, unless
required by law. The reader is cautioned not to place undue reliance on
forward-looking information.





For further information:

For further information: Richard A. Gusella, President and Chief
Executive Officer, Connacher Oil and Gas Limited, Phone: (403) 538-6201, Fax:
(403) 538-6225, www.connacheroil.com, inquiries@connacheroil.com


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