The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Globe Investor

News Sources

Take control of your investments with the latest investing news and analysis

Press release from CNW Group

Connacher Oil and Gas Limited Updates Information on Corporate Initiatives

Tuesday, October 04, 2011

Connacher Oil and Gas Limited Updates Information on Corporate Initiatives08:23 EDT Tuesday, October 04, 2011CALGARY, Oct. 4, 2011 /CNW/ - In light of recent stock market activity, Connacher wishes to clarify certain matters and update shareholders on the various initiatives that have been underway for some time, in the interest of enhancing market understanding of the financial stability and underlying value of the corporation.The company continues to enjoy substantial liquidity.  As announced on September 30, 2011, we have closed the sale of our lands and resources at Halfway Creek in the Alberta oil sands for cash proceeds of $26.8 million.  As a result, we currently have cash balances of over $75 million.  We are also in a process to sell our extensive landholdings at Latornell in the Deep Basin of northwestern Alberta.  Lands in this region are prospective for multizone liquids-rich natural gas and crude oil.  Bids are due in mid-October.  We also own and intend to monetize a marketable share position in Gran Tierra Energy Inc., a company which has considerable market value and affords good trading liquidity.  Our current cash balances and the proceeds from additional asset sales are earmarked for our debt reduction program, which includes repayment of the $100 million convertible debentures when due in June 2012.  Other than to secure $2 million for letters of credit, our $100 million credit facility remains undrawn and we do not anticipate making any draws in the foreseeable future.Our operations continue to perform well and generate substantial cash flow.  Great Divide production is stable.  Our revenues are supported by hedges through the remainder of this year and into 2012 that provide considerable downside protection in the event oil prices deteriorate.  Our refinery continues to operate at or above its rated capacity and generate strong financial results.  In addition to the significant net operating income being delivered, our ownership in the refinery continues to provide us with a hedge against heavy crude oil differential risk, provides diluent needed for our oilsands operations and also gives us a beneficial window on marketing opportunities in the United States for our bitumen and dilbit.Our oil sands joint venture initiative is proceeding as planned.  We expect receipt of bids later this year.  The transaction could involve an upfront cash payment and/or sell down of a minority interest in our Great Divide and Algar projects.  Any cash proceeds would be used to further enhance corporate liquidity and reduce long-term debt.Additionally, we continue to advance our light gravity crude oil resource plays in central Alberta and believe we have identified substantial reserve and resource potential.  We have engaged in farmout discussions with various well-financed parties.  We believe these discussions will result in transactions that involve upfront proceeds and retention of a meaningful carried working interest and exposure to aggressive, multi-well drilling programs at no financial cost to Connacher.Our conventional drilling program is substantially complete, certain indicated crude oil wells remain to be completed and tied in to facilities and further conventional outlays will be held to a minimum thereafter. Steps will be taken to minimize capital expenditures in other aspects of our business during the fourth quarter.We anticipate finalizing and announcing our 2012 budget in conjunction with our third quarter 2011 results.  Aside from oil sands maintenance expenditures estimated to be in the range of $30 million, 2012 capital spending will be entirely  discretionary and scalable in response to evidence of improved crude oil price realizations.Connacher Oil and Gas Limited is a Calgary-based oil company.  Our primary asset is our ownership of significant reserves and production of bitumen at our Great Divide Pod One and Algar projects.  We also hold extensive and valuable conventional crude oil and natural gas assets in central Alberta and we operate a profitable heavy oil refinery in Great Falls, Montana, U. S. A.Forward Looking InformationThis press release contains forward looking information relating to future anticipated joint venture and farmout arrangements and the proposed use of cash proceeds resulting therefrom, Connacher's plans to monetize additional non-strategic assets such as Latornell and its shareholding in Gran Tierra Energy Inc., the proposed use of proceeds of current cash balances and proceeds from asset sales, future draws on Connacher's credit facility, the protection afforded by hedges on future commodity price fluctuations, the reserve and resource potential associated with Connacher's light gravity crude oil resource plays, future capital expenditures and timing for finalizing and announcing Connacher's 2012 capital budget. 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 and market 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 operational risks in development, exploration, production and start-up activities; 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 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; sales volumes and risks and uncertainties associated with securing and maintaining the necessary regulatory approvals and financing to proceed with the continued expansion of the Great Divide oil sands project.  There can be no assurance that the process to sell Connacher's non-strategic assets will result in offers that will be acceptable to the company and there are risks, including market risks and commercial risks, associated with the completion of a sale transaction. In addition, market volatility and economic uncertainty may impact the timing and/or decision to sell Connacher's shareholding in Gran Tierra Energy Inc. Additional risks and uncertainties are described in further detail in Connacher's Annual Information Form for the year ended December 31, 2010 which is available at 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       Website: