Connacher announces $40 million flow-through share offering; First step of its integrated oil sands development financing plan


    CALGARY, Oct. 29 /CNW/ - Connacher Oil and Gas Limited (CLL-TSX)
announces today that it has entered into an agreement with a syndicate of
underwriters led by RBC Capital Markets under which Connacher will issue
8,000,000 flow-through common shares ("Flow-Through Shares") on a "bought
deal" basis for gross proceeds of $40 million ($5.00 per Flow-Through Share).
Connacher has granted the underwriters an over-allotment option to purchase up
to an additional 1,200,000 Flow-Through Shares on the same terms and
conditions, exercisable in whole or in part up to 30 days following closing of
the offering. The offering is scheduled to close on or about November 16,
    Connacher will use the gross proceeds from the sale of the Flow-Through
Shares to pay exploration expenses on the Corporation's properties which
qualify as Canadian Exploration Expenses (as such term is defined in the
Income Tax Act (Canada)). It is anticipated that the net proceeds will
primarily be used to further delineate and define Connacher's oil sands
properties through the drilling of additional core holes and for conducting a
three-dimensional (3-D) seismic program over Connacher's oil sands properties.
    A preliminary short-form prospectus will be filed with securities
regulatory authorities in all provinces of Canada except Quebec. The offering
is subject to the approval of such securities regulatory authorities.
    This Flow-Through Share offering represents Connacher's first step in its
active pursuit of financing arrangements to secure the additional capital
resources the Corporation estimates it will require to fund the ongoing
development of its oil sands operations, including the construction of the
Algar Project (the Corporation's second 10,000 bbl/d oil sands project), the
identification of other oil sands accumulations, to repay existing long term
and bank indebtedness and for general corporate purposes, including
establishment of a one year debt service reserve account related to possible
new long term debt.
    At present, Connacher is also investigating alternative new debt
financing arrangements, which may include a new first lien secured revolving
five year term credit facility and the issuance of long-term second lien
senior secured notes. Such new debt arrangements would be structured to
further enhance overall corporate liquidity and would better align Connacher's
capitalization with the long life characteristics of its refining assets and
its crude oil, natural gas and bitumen reserve and resource base and the
associated estimated future net revenue of its reserves and resources, as
determined by Connacher's qualified independent reserves evaluator. It is
anticipated that the second lien senior secured notes would require only
payments of interest at a fixed rate until maturity. This would allow the
Corporation to dedicate its available funds from operations to future capital
expenditure programs without having to amortize or retire long term debt. As
Connacher's bitumen production and sales from Great Divide increase, Connacher
anticipates being increasingly self sufficient in financing its prospective
capital expenditure programs. However, to allow Connacher to retain an
appropriately structured capitalization and also to pursue its growth
objectives, these debt arrangements may in future be supplemented from time to
time with issuances of common equity, if, as and when required, while
simultaneously seeking to limit share dilution.
    There can be no assurance that Connacher will be able to complete its
debt financing arrangements on the general terms and conditions described
above, or on terms and conditions acceptable to Connacher, or at all.

    This press release is not an offer to sell securities or the solicitation
of an offer to buy securities in any jurisdiction. Securities may not be
offered or sold in the United States absent registration or an applicable
exemption from registration. Any public offering of securities to be made in
the United States would be made by means of a prospectus that would be
obtainable from Connacher and that would contain detailed information about
Connacher and management, as well as financial statements.

    Connacher Oil and Gas Limited is a Calgary-based Canadian company
primarily engaged in the exploration for, and development, production,
refining and marketing of, bitumen, crude oil, natural gas and refined
petroleum products. The company's principal assets are its significant bitumen
reserves and resources and its 100 percent working interest in approximately
95,000 acres of oil sands leases in the Divide and Halfway Creek regions near
Fort McMurray, Alberta. It also owns conventional production and reserves at
Marten Creek and Three Hills, Alberta and at Battrum, Saskatchewan. Connacher
owns and operates a 9,500 barrel per day refinery in Great Falls, Montana and
maintains a valuable 26 percent equity stake in Petrolifera Petroleum Limited
(PDP - TSX), a public company active in Argentina, Colombia and Peru in South

    Forward-Looking Statements: This news release contains certain
"forward-looking information" within the meaning of applicable securities law
including statements regarding the Corporation's exploration and development
plans, the proposed restructuring of the Corporation's current debt facilities
and, the ability of the Corporation to raise additional debt and equity
financing. Forward-looking information is frequently characterized by words
such as "plan", "expect", "project", "intend", "believe", "anticipate",
"estimate", "may", "will", "would", "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 is based on
the opinions and estimates of management at the date the information is
provided, and is 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 information. 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 statements 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 statements.

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,,

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