Connacher's progress at Great Divide Pod One continues

    CALGARY, Sept. 29 /CNW/ - Connacher Oil and Gas limited (CLL - TSX)
announces today that bitumen production at its Great Divide Pod One steam
-assisted gravity drainage ("SAGD") oil sands plant continues to ramp up
following a recently-completed mandated turnaround and recently reached
9,750 barrels per day. This production level is within 250 barrels per day of
the original design capacity of the plant and was achieved with fourteen of
fifteen well pairs contributing to recorded volumes. Steam is presently being
injected into the fifteenth well pair and it is anticipated this well will
also be placed onstream once critical down hole temperature conditions have
been established in the related wellbores. When combined with current
conventional production of approximately 3,600 boe/d, Connacher's total
production has now surpassed 13,350 boe/d, a record for the company.
    Connacher also notes that an electrical submersible pump has also been
installed in one of the fourteen well pairs and following a monitoring period,
additional pumping equipment may be installed in other well pairs. It is
anticipated these installations would allow wells to produce with greater
consistency at lower pressures and therefore lower steam/oil ratios ("SOR'S").
Lower SORS would contribute to the continued lowering of unit operating costs
over time.
    Thus far in the third quarter 2008, Connacher is experiencing strong cash
flow from operations before changes in working capital as a result of the
significant and growing contribution of its conventional production and its
bitumen production at Pod One. The impact of these volume increases in recent
months has been reinforced by continuing reductions in related unit operating
costs, especially for bitumen production. In August 2008, for example, these
unit operating costs were estimated to have been reduced to under $20 per
barrel, which were well below levels recorded during the earlier stages of our
rampup at Pod One. Further unit operating cost improvements are anticipated as
2008 progresses, as our recent volume rampup will spread associated fixed
costs over our larger production base. Unit operating costs for our total
production base, including conventional and bitumen production, were estimated
to have been even lower at approximately $16.00 per boe in August 2008. These
lowering of costs, together with strong second half 2008 selling prices, have
provided the basis for much improved wellhead or plant gate netbacks for
bitumen and overall production and for resultant corporate cash flow from
operations before working capital changes.
    Readers should note that terms such as netbacks and cash flow from
operations before working capital changes are non-GAAP terms and that the use
of the term barrel of oil equivalent ("boe") may be misleading if used in
isolation. Refer to the Forward-Looking Information Statement at the end of
this press release for further advice and clarification in this regard.
    Recently, statements have been made by the ruling Conservative Party of
Canada during the current Canadian election campaign suggesting that a
"re-elected Harper Government will prohibit the exportation of bitumen outside
of Canada for upgrading in order to take advantage of lower pollution or
greenhouse gas emissions standards elsewhere." While this is not yet official
policy as the outcome of the election remains to be determined and is
seemingly focused on bitumen sales to markets outside North America, Connacher
can advise that it anticipates selling little, if any, raw bitumen anywhere
and that virtually all of its current sales, which primarily consist of
diluted bitumen ("dilbit"), have been made and are being made in Canada,
primarily to Canadian purchasers which are also operators of integrated
upgrading facilities in the general vicinity of Connacher's Pod One
operations. Furthermore, Connacher currently purchases Bow River heavy crude
oil produced in southern Canada for its refinery at Great Falls, Montana. Our
refinery operates effectively and safely within the framework of very strict
environmental standards as established by US Federal and Montana State
    Connacher is conducting front-end engineering and design ("FEED") studies
relating to a potential expansion over several years of the daily throughput
capacity of its Montana refinery from approximately 9,500 bbl/d to
approximately 35,000 bbl/d. This study is now scheduled to be completed
sometime in 2009, at which time Connacher's management will assess the merits
of such an expansion in the context of anticipated costs, anticipated
investment returns, together with prevailing and anticipated conditions for
both financial markets and product markets. If warranted, the matter would
then be brought forward for consideration by the company's Board of Directors.
A final decision whether or not to proceed will depend upon these and other
factors, which will be assessed at the appropriate time, which remains solely
within Connacher's determination as it owns 100 percent of the refinery as
well as most of its upstream operations.
    Connacher also continues to examine various pipeline alternatives as a
longer-term solution to the requirement of transporting growing Great Divide
dilbit production to available markets. Presently Connacher trucks its dilbit
to available markets. A decision on which alternative to pursue will likely be
arrived at after construction is initiated at the company's second
10,000 bbl/d Great Divide project at Algar, for which regulatory approval is
believed to be imminent. Once the regulatory approval is issued by Alberta's
Energy Resources Conservation Board, further formal approval by the Alberta
Cabinet through the issuance of an Order-in-Council is required. It is
anticipated this should happen as quickly as the item can reach the Cabinet's
Agenda, following which Connacher will be authorized to proceed with field
    Connacher Oil and Gas Limited is a Calgary-based crude oil, natural gas
and bitumen exploration and production company. It also owns a 9,500 bbl/d
heavy oil refinery located at Great Falls, Montana and a 24 percent equity
stake in Petrolifera Petroleum Limited. Connacher's common shares and
convertible debentures are listed for trading on the Toronto Stock Exchange.

    Forward-Looking Information:

    This press release contains "forward-looking information" including: the
timeline for placing the fifteenth well pair onstream at Pod One; anticipated
installation of additional electrical submersible pumps in existing wellbores
at Pod One resulting in more consistent production at lower pressures and
resultant steam/oil ratios and related operating costs; further anticipated
operating cost reductions at Pod One arising form continued production
increases compared to those thus far recorded in 2008 year-to-date;
Connacher's intention with respect to raw bitumen sales; the anticipated
timing of completion of the frond-end engineering and design studies related
to the potential expansion of the company's Montana refinery and the timing of
consideration of the merits of the refinery expansion by Connacher's Board of
Directors; the timing and selection and financing of a pipeline alternative to
transport the company's production from Great Divide Pod One and other similar
projects to market as an alternative to the company's current practice of
trucking diluted bitumen to available markets; development of additional oil
sands projects (including receipt of regulatory approvals in respect of Algar)
and anticipated financial and operating results for the third quarter of 2008.
Forward-looking information is frequently characterized by words such as
"plan", expect", "project", "intend", "believe", "anticipate", estimate",
"may", "will", "could", "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 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 during construction and in start-up operations
following the turnaround, 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, construction, start-up, approvals and the continuing ability to
access sufficient capital from external sources if required. Actual production
levels at Great Divide Pod One and the timelines associated therewith and the
timeline for receipt of regulatory approval in respect of Algar may vary from
those anticipated in this press release and such variations may be material.
Additionally, financial and operating results for the third quarter of 2008
are dependent on, among other things, actual commodity prices realized by the
company and maintenance of current operating costs in an inflationary
environment. Readers are reminded that cash flow and cash flow from operations
and total netbacks and per unit netbacks do not have standardized meanings
prescribed by Canadian generally accepted accounting principles ("GAAP") and
therefore may not be comparable to similar measures used by other companies.
Cash flow is calculated before changes in non-cash working capital, pension
funding and asset retirement expenditures. The most comparable measure
calculated in accordance with GAAP would be net earnings. Cash flow is
commonly used in the oil and gas industry and when actual amounts are
presented, reconciliation with net earnings is provided by the company. Total
netbacks by product are calculated by deducting the related diluent,
transportation, field operating costs and royalties form revenues. Unit
netbacks are calculated by dividing total netbacks by production volumes.
Total netbacks are usually reconciled to net earnings when actual amounts are
presented. All references to barrels of oil equivalent (boe) are calculated on
the basis of 6mcf:1bbl. Boes may be misleading, particularly if used in
isolation. This conversion is based on an energy equivalency conversion method
primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead. 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, 2007,
which is available at Connacher undertakes no obligation to
update forward-looking statements if circumstances or management's estimates
or opinions should change, unless required by law. Due to the risks and
uncertainties inherent in forward-looking information, the reader is cautioned
not to place undue reliance on this forward-looking information.

For further information:

For further information: Richard A. Gusella, President and Chief
Executive Officer, Grant D. Ukrainetz, Vice President, Corporate Development,
Phone: (403) 538-6201, Fax:(403) 538-6225,,

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