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Press release from CNW Group

Connacher Oil and Gas Limited Provides Operational Update; Daily Bitumen Production at Algar has Surpassed 6,000 barrels per day; Combined Bitumen Production at Great Divide Has Exceeded 13,200 barrels per day

Tuesday, October 26, 2010

Connacher Oil and Gas Limited Provides Operational Update; Daily Bitumen Production at Algar has Surpassed 6,000 barrels per day; Combined Bitumen Production at Great Divide Has Exceeded 13,200 barrels per day09:00 EDT Tuesday, October 26, 2010CALGARY, Oct. 26 /CNW/ - Connacher Oil and Gas Limited ("Connacher") announced today that combined bitumen production from its Pod One and Algar steam assisted gravity drainage ("SAGD") operations exceeded 13,200 bbl/d during the seven days ended October 22, 2010. This represents a 14 percent increase in output since our last report on October 4, 2010. Algar and Pod One are located on the company's Great Divide oil sands lease block, approximately 80 km southeast of Fort McMurray, Alberta. Production levels during ramp up can fluctuate on a daily basis, as produced emulsions in the early stages of a ramp up are variable, as new equipment at the surface is activated and as volumes escalate towards design capacity.At Algar, bitumen production averaged over 6,000 bbl/d for the seven days ended October 22, 2010, an increase of 20 percent during the past three weeks. To date, 15 of the project's 17 SAGD well pairs have been converted to full SAGD production, with one well remaining on circulation. The seventeenth well pair has not yet been steamed. The company recently completed brief workovers on selected well pairs at Algar to optimize steam injection and production from the middle of the well bores, in addition to the heel and toe of the well bores, a design innovation relative to Pod One. During this short time, our ramp up at Algar was temporarily flattened. Ramp up of total steam and fluid rates is now continuing as steam injection has been improved and as the steam chambers develop. Readers should note that Algar production, related costs and revenues will be capitalized and will not be recorded in the company's operating and financial results until such time as a declaration of commerciality occurs.At Pod One, bitumen production averaged over 7,200 bbl/d for the seven days ended October 22, 2010. This represents an increase of eight percent over both September 2010 production and also over the average daily Pod One production during the three months ended September 30, 2010. The company recently added an additional free water knockout vessel at Pod One. This is anticipated to further improve the reliability of the emulsion treating process at Pod One and more closely align it to the treating system being used at Algar.Connacher continues to advance technical innovation in its SAGD operations. The company received regulatory approval this month for the co-injection of methane (with steam) on the five northern well pairs at Pod One. It is expected this process will reduce steam:oil ratios (SORs) while maintaining or improving production levels from these well pairs. Steam could then be diverted to other well pairs, with lower SORs, to increase overall production. Connacher's co-injection project is one of the first commercial approvals of its kind in the oil sands and its implementation aligns with Connacher's strategy of continuously pursuing methods of improving the SAGD process.When combined with Connacher's current conventional production of approximately 2,260 boe/d, Connacher's total production is now approximately 15,500 boe/d. Readers are cautioned that all references to barrels of oil equivalent (boe) are calculated on the basis of 6Mcf:1 bbl. This conversion is based on an energy equivalency method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Boes may be misleading, particularly if used in isolation.Operations at the company's 9,500 bbl/d heavy oil refinery located in Great Falls, Montana continue to be strong. Crude charged during the month of September averaged slightly in excess of 10,200 bbl/d, for a utilization rate of 108 percent. Weather-related paving conditions for asphalt have seen an improvement thus far in October 2010 over September 2010, facilitating current sales of asphalt at average prices in excess of US$90/bbl. Diesel and jet fuel prices continue to be robust. The refinery's results are anticipated to evidence the benefit of the temporary widening of heavy oil differentials related to the recent disruption in Enbridge Inc.'s crude pipeline delivery system. We anticipate this will partially offset the dampening effect of wider heavy oil differentials on the company's upstream bitumen operations and related results during September and into October 2010. More normal pricing conditions are already evident for heavy oil.Connacher's full operating and financial results are anticipated to be released to the public on November 10, 2010. These results will be the topic of discussion during a Conference Call scheduled for 8:00 AM Calgary time on November 11, 2010. Phone in details and other directions regarding the Conference Call will be included in the company's Press Release.Connacher Oil and Gas Limited is a Calgary-based crude oil, bitumen, natural gas and natural gas liquids production company. Principal oil sands assets are held in the Great Divide region of Alberta. Conventional production is held in Alberta and Saskatchewan and Connacher also owns and operates a heavy oil refinery in Great Falls, Montana and maintains an approximate 19 percent equity stake in Petrolifera Petroleum Limited, a public oil company active in Argentina, Peru and Colombia in South America. Our common shares (CLL - TSX) and our outstanding convertible debentures (CLL.DB.A - TSX) are listed for trading on the Toronto Stock Exchange.(Forward-Looking Information:This press release contains forward looking information including but not limited to continued production ramp up at Pod One and Algar, anticipated improvements in the reliability of the emulsion treating process at Pod One and corresponding production increases as a result of the installation of an additional free water knockout vessel, the anticipated benefits from the co-injection of methane (with steam) in certain wells at Pod One and the anticipated benefits of widening heavy oil differentials in respect of the company's refining operations, which are expected to partially offset the effect of wider differentials on the company's upstream bitumen operations during September and into October. Forward looking information is based on management's expectations regarding results of operations, production, future commodity prices and foreign exchange rates, future capital and other expenditures (including the amount, nature and sources of funding thereof), environmental matters, business prospects and opportunities and future economic conditions. Forward looking information involves significant known and unknown risks and uncertainties, which could cause actual results to differ materially from those anticipated. These risks include, but are not limited to: the risks associated with the oil and gas industry (e.g., operational risks in development, exploration and production; timing difficulties or delays and additional costs relating to the production ramp up of Pod One and Algar; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), the risk of commodity price and foreign exchange rate fluctuations and risks associated with the impact of general economic conditions. Additional risks and uncertainties affecting Connacher and its business and affairs are described in further detail in Connacher's Annual Information Form for the year ended December 31, 2009, which is available at www.sedar.com.Although Connacher believes that the expectations in such forward-looking information are reasonable, there can be no assurance that such expectations shall prove to be correct. The forward-looking information included in this press release is expressly qualified in its entirety by this cautionary statement, The forward-looking information included in this press release is made as of the date hereof and Connacher assumes no obligation to update or revise any forward-looking information to reflect new events or circumstances, except as required by law.)For further information: Richard A. Gusella, Chairman and Chief Executive Officer, OR Peter D. Sametz, President and Chief Operating Officer, OR Grant D. Ukrainetz, Vice President, Corporate Development, Phone: (403) 538-6201, Fax: (403) 538-6225, inquiries@connacheroil.com, Website: connacheroil.com