CALGARY, Feb. 2 /CNW/ - Connacher Oil and Gas Limited (CLL - TSX) is
presently in the midst of the most active drilling program in the history of
the company.
    The company recently had ten rigs working on its properties, including
five core hole rigs and one surface hole rig on its exploration and
delineation core hole drilling program at the company's Great Divide project.
Additionally, one drilling rig is now drilling the fifth horizontal production
well of the company's initial five SAGD well pairs from Pad 102 at the Great
Divide Pod One project. Also, three drilling rigs are being utilized to drill
conventional natural gas prospects at Marten Creek and Simonette, Alberta. A
second drilling rig, which will be utilized on Pad 101 at the Great Divide Pod
One project, is scheduled to arrive shortly and together with the Tri City No.
36 rig presently on location, will be utilized to drill the next ten
additional production and steam injection SAGD horizontal well pairs. This
will bring to fifteen the total number of well pairs that will be available
for steam injection and subsequently bitumen production targeted to reach
10,000 bbl/d, once the plant presently under construction is commissioned,
start-up occurs in the summer of 2007 and bitumen begins to flow from the
horizontal wells.
    To date, the drilling of the horizontal production wells has proceeded
extremely favorably with no drilling complications. Connacher has been able to
drill horizontal production wells to a measured length approaching 650 meters,
approximately 150 meters longer than the original prognosis. This was done
because the wells continued to penetrate consistently excellent
bitumen-saturated reservoir, and accordingly by extending the reach of the
well bore, more reservoir will be opened up for prospective production and
recoveries once production is initiated. The company has also been successful
in positioning the horizontal production well bores in close proximity to the
Paleozoic basement, thus minimizing the standoff from basement. This
accordingly increases the amount of the reservoir above the production wells
which can yield producible bitumen and should therefore increase recoverable
reserves. Connacher also anticipates extending the horizontal length of the
steam injection horizontal wells as a consequence of the continuous high
quality reservoir encountered to date in the drilling of the horizontal
production wells.
    Significant progress is also being made in the construction of the plant
and facilities at Great Divide Pod One. Readers are referred to our website at
www.connacheroil.com; click on Operations/Great Divide/Photo Gallery for
up-to-date pictures of the advances being made in the construction program.
Connacher has scheduled a field trip for invited analysts, institutional and
other large shareholders, its bankers and various lenders who provided funds
pursuant to the company's US $195 million Term Loan B project financing in
October 2006. These funds, including a US$15 million working capital facility
for the company's Montana Refining operation, are being utilized in the
construction of the Pod One facility.
    Elsewhere at Great Divide, the company is progressing very favorably with
its core hole drilling program which is focused on an extension to the east of
Pod One and on Pods Two, Four and Five as well as various other exploratory
areas within Connacher's main lease block surrounding Pod One. Prior to year
end 2006, a total of six new core holes were completed; results of these wells
will be incorporated into the company's year end reserve determination for
Great Divide. This information will be included in Connacher's report of year
end 2006 financial and operating results, scheduled for release on March 23,
2007.
    During 2007, a total of 28 additional core holes have now been drilled
with positive and in some cases very encouraging results. Several core holes
have penetrated reservoir thicknesses up to 30 meters, which is thicker than
that encountered at Pod One. In the opinion of Connacher's management,
reservoir quality is considered encouraging and similar to that generally
encountered in the region. All the cores and logs from the current program
will be analyzed in detail and the results will be forwarded to the company's
independent engineer for their assessment and utilization in the preparation
of a mid-year 2007 update of their estimate of bitumen reserves and resources.
Seventy (70) core holes have been planned for this year's program, leaving 36
to be drilled prior to break-up.
    Connacher's extensive 68 square kilometer 3D program over the balance of
its main lease block is also underway. The results of this program are
expected to further assist the company in designing its 2008 core hole
program, which will likely include approximately the same number of new core
holes as are contemplated in this year's program.
    Connacher also wishes to advise that it is in the final stages of
concluding a decision to apply for commercial development of Pod Two at Great
Divide. This determination is expected to occur shortly, following additional
and continuous consultation with relevant regulatory agencies and authorities
and final review and appraisal of available technical data. An application
would also entail extensive consultation with all relevant stakeholders at the
appropriate time. A near-term application and subsequent timely approval would
enable Connacher to minimize the period between completion of current drilling
and of the Pod One plant, and subsequent commencement of the development at
Pod Two. This would be consistent with the company's strategy of repeatability
and sustainability in the growth of its production base in the oil sands.
Sequential planning and development is anticipated to assist in continuing
cost control and compression of the time taken from pod discovery to
production start up.
    Since the commencement of the winter drilling season in 2007, Connacher
has also drilled 13 conventional wells at Simonette and at Marten Creek in
northern Alberta. Of the total wells drilled, six are indicated natural gas
wells and two are suspended awaiting further evaluation, one is drilling and
four were plugged and abandoned. A further five wells are anticipated in these
areas before breakup and subject to weather conditions, the company will be
conducting testing, completion and tie-in activity to enhance daily production
and its conventional reserve base. As these areas are winter-only access
regions, efforts must be focused on a quick turnaround from drilling to the
production stage or otherwise these developments must await the next drilling
season in December 2007 or January 2008.
    Connacher is extremely pleased with developments at Great Divide and is
satisfied with the results to date of its conventional exploratory drilling
program. The progress at the Pod One plant is on schedule and the company is
benefiting from its modular approach which is helping to keep plant costs
within budgetary limits and construction on schedule. Drilling results from
the horizontal SAGD production wells are most encouraging and reinforce
earlier interpretations from analysis of cores and logs. New core hole results
are also positive and are serving to reinforce Connacher's continued
enthusiasm for the long-term potential for production expansion from its
landholdings in the area. Specific results at Pod Two would seem to support a
near-term application for development, subject to final deliberations. New oil
sands opportunities are also emerging, which if captured would enable
Connacher to capitalize on its experience and performance to date as it
focuses on future growth and development.

    Connacher Oil and Gas Limited is a public Canadian oil and gas
exploration and production company. Its principal asset is its interest in the
Great Divide Pod One 10,000 bbl/d oil sands project and surrounding or
proximate 90,000 acres of oil sands leases which are situated in northeastern
Alberta. Connacher also owns producing crude oil and natural gas properties at
Battrum, Saskatchewan and at Marten Creek, Simonette and Three Hills, Alberta,
a 10,000 bbl/d refinery at Great Falls, Montana and a 26 percent equity
interest in Petrolifera Petroleum Limited (PDP -TSX), a public Canadian oil
and nautral gas company active in Argentina, Peru and Colombia. Connacher
anticipates releasing its final year end 2006 operating and financial results
on March 23, 2007.

    Forward-Looking Statements: This press release contains certain
forward-looking statements within the meaning of applicable securities law.
Forward-looking statements are frequently characterized by words such as
"plan", "expect", "project", "intend", "believe", "anticipate":, "estimate"
and other similar words, or statements that certain events or conditions "may"
or "will" occur. Forward-looking statements are based on the opinions and
estimates of management at the date the statements are made, and are 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 statements. These factors include the inherent risks involved
in the exploration and development of oil sands properties, the uncertainties
involved in interpreting drilling results and other geological data,
fluctuating oil prices, the possibility of project cost overruns or
unanticipated costs and expenses, uncertainties relating to the availability
and costs of financing needed in the future and other factors including
unforeseen delays. As an oil sands enterprise in the development stage,
Connacher faces risks, including those associated with exploration,
development, approvals and the ability to access sufficient capital from
external sources. Anticipated exploration and development plans relating to
Connacher's properties in 2007 are subject to change. For a detailed
description of the risks and uncertainties facing Connacher and its business
and affairs, readers should refer to Connacher's Annual Information Form for
the year ended December 31, 2005. Connacher undertakes no obligation to update
forward-looking statements if circumstances or management's estimates or
opinions should change, unless required by law. The reader is cautioned not to
place undue reliance on forward-looking statements.