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Press release from CNW Group

Connacher Engages Rothschild as Exclusive Financial Advisor to Secure Joint Venture with Third Party for Algar Expansion Project and Subsequent Development Opportunities at Great Divide

Tuesday, August 02, 2011

Connacher Engages Rothschild as Exclusive Financial Advisor to Secure Joint Venture with Third Party for Algar Expansion Project and Subsequent Development Opportunities at Great Divide17:26 EDT Tuesday, August 02, 2011CALGARY, Aug. 2, 2011 /CNW/ - Connacher Oil and Gas Limited (CLL - TSX) announced today it has engaged Rothschild  as its exclusive financial advisor solely for the purpose of assisting the company in establishing a joint venture with a third party to develop  its non-producing Great Divide oil sands assets.The initial focus of the joint venture will be to advance the proposed development of an additional 24,000 bbl/d of bitumen productive capacity at Connacher's Algar steam-assisted gravity drainage ("SAGD") project on the company's Great Divide oil sands acreage in northeastern Alberta. Connacher submitted an application to regulators for approval of an Environmental Impact Assessment and the Great Divide Expansion Project at Algar in May, 2010 and anticipates approval in late 2011.  This would increase the authorized production at Great Divide from 20,000 bbl/d at present to 44,000 bbl/d.The establishment of a joint venture will enable this project to be brought forward in a timely manner, permitting more immediate access to the long life production (over 25 years) of the already identified and evaluated approximately 320 million barrels of probable bitumen reserves owned by Connacher, which volumes supported the aforementioned expansion application.  These probable reserves are in addition to Connacher's approximate 180 million barrels of proved ("1P") reserves already associated with its existing Pod One and Algar projects.  These reserve estimates were prepared by GLJ Petroleum Limited, independent petroleum consultants, in their February 2011 report, effective December 31, 2010.Timely and successful negotiation of a joint venture could facilitate ordering of long lead items such as boilers and evaporators by year end 2011. This, in turn, could enable the start-up of construction during the latter part of 2012, with first bitumen production by the end of 2013, assuming the initial expansion is comprised of two sequential 12,000 bbl/d projects as opposed to one 24,000 bbl/d project. It will be recalled that to plan for continued expansion at Algar, Connacher prepared the project site for brownfield expansion, which is anticipated to result in a lower prospective cost structure as a consequence.  Connacher anticipates detailed costing of its expansion alternatives will be completed at approximately the same time as it receives regulatory approval and near the latter stages of completing negotiations for the proposed joint venture.The joint venture will represent a unique opportunity for interested parties to align themselves with an established operator in the near-term development and production of meaningful volumes of bitumen from  the oil sands, as to date most joint ventures in the SAGD space have focused on higher risk, longer-term resources opportunities.  Connacher will continue to be the operator of the Great Divide leases and prospectively anticipates retaining a majority interest in the lands and reserves.  It is also anticipated that, as estimated by GLJ, timely and sequential development of additional productive potential already identified on the Great Divide lease block will allow for total production potential from the block to exceed 54,000 bbl/d from proved, probable and possible ("3P") reserves (aggregating 604 million bbl, of which 104 million bbl are possible reserves), with additional upside separately recognized for best estimate contingent resources.Rothschild is a worldwide financial advisory firm with a 200 year history.  With 1,000 bankers based in 40 countries, the firm's scale, global reach and local knowledge enable it to develop relationships and deliver effective solutions to support clients worldwide.  Rothschild recently opened its Calgary office in recognition of, among other things, the increasingly important role the oil sands will play in future energy developments, not only in Canada but on a worldwide basis.Connacher is a Calgary-based producer and developer of heavy gravity and light gravity crude oil reserve and resource deposits in Alberta's oil sands and in central Alberta, respectively, using modern technology, including horizontal drilling and SAGD in situ recovery techniques in the oil sands and horizontal drilling and multi-frac technology in its pursuit of light gravity crude oil resource opportunities in central Alberta.  Connacher also owns and operates a profitable 9,500 bbl/d heavy oil refinery in Great Falls, Montana.  Connacher common shares and convertible debentures are listed for trading on the Toronto Stock Exchange.Forward Looking InformationThis press release contains forward looking information including but not limited to expectations regarding future production levels, reserves estimates, future development activities, possible joint venture arrangements and the anticipated impact thereof on the proposed expansion at Algar including on the timing of ordering long-lead items, timing of start-up construction and the timing of initial bitumen production, the anticipated retention of a majority interest in lands and reserves on a prospective basis, the anticipated impact of brownfield construction on the costs of the Algar expansion, the timing of preparing a detailed costing of the Corporation's expansion alternatives and the timing of receipt of regulatory approval for the proposed expansion at Algar.Forward looking information is based on management's expectations regarding future growth, 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), plans for and results of drilling activity, 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; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve and resource estimates, the uncertainty of geological interpretations, 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, risks associated with the impact of general economic conditions and risks and uncertainties associated with securing and maintaining the necessary regulatory approvals to proceed with the operation and continued expansion of the Great Divide oil sands project.  Statements relating to "reserves" are deemed to be forward looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated, and can be profitably produced in the future.  Certain information and assumptions relating to the reserves reported herein are set forth in Connacher's annual information form for the year ended December 31, 2010 ("AIF") which is available at www.sedar.com.  The reserves estimates of Connacher's properties described herein are estimates only.  The actual reserves on Connacher's properties may be greater or less than those calculated. Possible reserves are those additional reserves that are less certain to be recovered than probable reserves.  There is a 10% probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves. In addition, design capacity is not necessarily indicative of the stabilized production levels that may ultimately be achieved at Connacher's SAGD facilities. Additional risks and uncertainties affecting Connacher and its business and affairs are described in further detail in Connacher's AIF. 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 herein is made as of the date of this press release 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 inquiries@connacheroil.com       Fax: (403) 538‐6225 Website: www.connacheroil.com