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Press release from CNW Group

Connacher Announces Breakthrough Results From its SAGD+(TM) Field Trial at Algar

Thursday, October 20, 2011

Connacher Announces Breakthrough Results From its SAGD+(TM) Field Trial at Algar20:15 EDT Thursday, October 20, 2011CALGARY, Oct. 20, 2011 /CNW/ - Connacher Oil and Gas Limited (CLL - TSX) today announced breakthrough results from its SAGD+(TM) "steam with solvent" field trial on two of its wells located on Pad 203 at its Algar steam-assisted gravity drainage ("SAGD") project, the second stage of the company's Great Divide oil sands operations in northeastern Alberta.Data recently submitted to the Energy Resources Conservation Board ("ERCB") registry, which will shortly be available in the public domain, demonstrated that, compared to an April 2011 baseline, daily average per well bitumen production volumes during the months of August 2011 and September 2011 increased 23 percent.  This was also accompanied by an average SOR decrease of 15 percent.  Testing has occurred over a twelve week period and results surpassed our original expectations.Volumetric concentrations of solvent injection were generally in the ten percent range and, as part of the field trial, have been increased to 15 percent during the month of October 2011.  The impact of this change is anticipated to result in further productivity improvements.Of considerable additional importance is that reservoir retention of the injected solvent has decreased to less than 15 percent, or conversely solvent recovery has reached 85 percent or better, well above levels considered necessary for economic application, having regard to the relative value of bitumen and solvent.  Connacher believes this is the first time this has been achieved at field level.The baseline wells were chosen because they had achieved a very stable level of production since being placed onstream in 2010, when Algar commenced production.  The SOR decrease was also limited by the necessity to manipulate steam injection rates to maintain normal operating pressure during the continuing high pressure steam injection phase at Algar, which will be modified at a later date as the company transitions its Algar operation to low pressure SAGD.These results will continue to be accumulated and in the near future, as data is assimilated and assessed, the trial may be expanded to include additional wells on Pad 203.  In addition to the obvious benefit of higher per well productivity, which can serve to enhance the present worth of long life reserves,  Connacher also anticipates that over time the application of SAGD+(TM) can also contribute to improved recovery factors, the extent of which remains to be determined.While solvent recoveries and related production impacts have considerably exceeded expectations, facility modifications would have to be implemented to fully capture and recycle the recovered solvent.  Decisions to expand the pilot and to subsequently modify facilities will await a full cycle economic assessment of the project.  Prudence in the context of current economic and capital market uncertainty also suggests constrained new investment activity in the short term, until there is evidence of increased clarity on prospective crude oil, solvent and bitumen pricing and the outcome of other business initiatives presently underway which, upon completion, would continue to advance Connacher's overall liquidity initiatives.Connacher Oil and Gas Limited is a Calgary-based energy company.  Its primary asset is its 100 percent ownership of bitumen reserves and production from two SAGD plants, Pod One and Algar, at its Great Divide oil sands lease block in northeastern Alberta.  Connacher also owns conventional reserves and production in central Alberta and owns and operates a profitable 9,500 bbl/d heavy crude oil refinery in Great Falls, Montana.Forward Looking InformationThis press release contains forward looking information including, but not limited to, the anticipated impact of changes in volumetric concentrations of solvent injection on future productivity, possible expansion of the application of SAGD+(TM) on additional wells, the potential impact of SAGD+(TM) on recovery factors and the implementation of future facility modifications to fully capture and recycle recovered solvent.  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 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.   Moreover, reported average production levels may not be reflective of sustainable production rates and future production rates may differ materially from the production rates reflected in this press release due to, among other factors, difficulties or interruptions encountered during the production of bitumen or other hydrocarbons.  Additional risks and uncertainties are described in further detail in Connacher's Annual Information Form ("AIF") for the year ended December 31, 2010 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 October 20, 2011 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:  connacheroil.com