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Press release from CNW Group

Connacher Provides Operational Update; Bitumen Production at Great Divide Averaged 14,750 bbl/d for the Last Week of December, 2010

Wednesday, January 05, 2011

Connacher Provides Operational Update; Bitumen Production at Great Divide Averaged 14,750 bbl/d for the Last Week of December, 201009:00 EST Wednesday, January 05, 2011CALGARY, Jan. 5 /CNW/ - Buoyed by continuing improvements in Great Divide Pod One production during the month of December 2010, Connacher Oil and Gas Limited ("Connacher" - CLL - TSX) achieved a seven day field-recorded rolling average production level of 14,750 bbl/d for the period ended December 31, 2010.  This sets the stage at an excellent level at which to commence 2011.  In addition, the company has commenced its Great Divide corehole drilling and 3D seismic program as well as a light oil horizontal multi-frac drilling program in central Alberta.During the month of December 2010, bitumen production averaged approximately 14,300 bbl/d, including 7,800 bbl/d from Pod One, the highest monthly average at Pod One since December 2009, and 6,500 bbl/d from Algar.  Algar continues to rampup favorably, having only been on-stream since August 2010. During the month of December 2010, the seven day rolling average bitumen production at Pod One ranged from 7,380 bbl/d to 8,070 bbl/d, the variance in production due primarily to minor plant upsets resulting from extremely cold winter conditions.  During the month of December 2010, the seven day rolling average bitumen production at Algar ranged from 5,400 bbl/d to 7,400 bbl/d, the variance in production due primarily to plant downtime associated with maintenance to the glycol cooling system.  On a combined basis, peak rolling seven day average bitumen production in the month of December was 15,130 bbl/d. Full year 2010 bitumen production was estimated to have averaged approximately 8,250 bbl/d, within two percent of the company's full year guidance. Readers are cautioned that these production volumes are field estimates and remain to be confirmed following normal head office review.  Also, seven day rolling average periods are not necessarily indicative of longer term production capability and bitumen production levels during the rampup phase can be erratic.Connacher is pleased with the improvement in the level and consistency of Pod One production, reflecting the benefit of stable power supplies, consistent steam generation and steam injection during the period since September 2010 when the Algar cogeneration plant was commissioned and placed into operation.  Also, Connacher continues to be pleased with overall Great Divide production levels, which sets the stage for consistent sequential and year over year improvement in both operating and financial results, especially if crude oil prices persist at current levels, even with the strengthening in the Canadian dollar. Our systematic hedging program is also anticipated to provide significant protection against the downside risk of sharp declines in crude oil prices throughout 2011.As previously announced, Connacher anticipates a more modest capital program of $104 million during 2011, which we anticipate will be funded from cash and internally generated cash flow. Growth expenditures include a first quarter 2011 60-70 well core hole drilling and 3D seismic program at Great Divide and Thornbury, which has commenced and is designed to add new resources, upgrade resources to reserves and assist in the selection, in 2012 and later, of the location of the next round of well pads for new production at Pod One and Algar.  Also, the company has spudded the second well of a three well light oil horizontal multi-frac drilling program in central Alberta.  The first well in this program has already been drilled and will be completed shortly.  Results of this high netback opportunity will be announced once all three wells have been completed later in the first quarter of 2011. The balance of our 2011 capital outlays will be for maintenance capital primarily at Great Divide and to comply with regulatory or other requirements at our Montana refinery.Connacher Oil and Gas Limited is a Calgary-based crude oil, natural gas and bitumen exploration, development and production company.  Our principal assets are located in the oil sands at Great Divide, Alberta where we operate two steam assisted gravity drainage ("SAGD") plants for the production and sale of bitumen.  We also own conventional crude oil and natural gas production at Marten Creek, Latornell, Randall, Gilby and Three Hills, all in Alberta.  We recently agreed to sell our 18 degree API medium gravity crude oil production and reserves and some minor surrounding exploratory acreage at Battrum, Saskatchewan for an attractive consideration of $57.5 million, in a transaction scheduled to close on February 15, 2010.  We own and operate a profitable 9,500 bbl/d heavy oil refinery at Great Falls, Montana and own approximately 19 percent of Petrolifera Petroleum Limited, a public crude oil and natural gas company active in South America. Forward-Looking InformationThis news release contains certain "forward-looking information" within the meaning of applicable securities laws including information related to anticipated bitumen production levels and the timing associated therewith at the company's Great Divide Pod One and Algar facilities, anticipated improvement in operational and financial results, anticipated protections afforded by our hedging program, planned completion of the sale of the Battrum properties and the proposed use of proceeds in connection therewith, expectations of future exploration and exploitation activities including the anticipated timing associated therewith, future expansion of the company's reserves and resources base, the anticipated expenditures associated with our 2011 capital program and the company's ability to self-finance the company's 2011 capital programs. Reported average or daily production levels may not be reflective of sustainable production rates over extended periods of time and future production rates may differ materially from the production rates reflected herein due to, among other factors, difficulties or interruptions encountered during the production of bitumen.  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 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 risks include, but are not limited to risks associated with the oil and gas industry (e.g. operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections in relation to production, costs and expenses and health, safety and environmental risks), the risk of commodity price and foreign exchange rate fluctuations, risks associated with obtaining, maintaining and the timing of receipt of regulatory approvals, permits and licenses and uncertainties relating to access to capital and credit markets. In addition, the completion of the sale of the Battrum properties is subject to the satisfaction of certain conditions, customary for transactions of this nature. There is, however, a risk that the purchase and sale may not be completed as contemplated. Additional risks and uncertainties affecting Connacher and its business and affairs are described in further detail in the Corporation's Annual Information Form for the year ended December 31, 2009 which is available at www.sedar.com. The forward-looking information included in this press release are expressly qualified in their entirety by this cautionary statement. The forward-looking information included in this press release is made as of the date hereof and the company assumes no obligation to update or revise this information to reflect new events or circumstances, except as required by law.For further information: Richard A. Gusella Chairman and Chief Executive OfficerORPeter D. Sametz President and Chief Operating OfficerORGrant D. Ukrainetz Vice President, Corporate DevelopmentPhone:  (403) 538-6201     inquiries@connacheroil.com      Fax:  (403) 538-6225 Website:  connacheroil.com