CALGARY, July 10 /CNW/ - Connacher Oil and Gas Limited (CLL - TSX)
announces today that the company's bitumen reserve and resource base expanded
considerably during the first half of 2007. The increase reflects the impact
of the company's drilling of 81 core holes in December 2006 and during the
first quarter of 2007. Connacher's proved plus probable (2P) recoverable
bitumen reserves increased 111 percent to 178 million barrels. The company's
proved plus probable plus possible (3P) recoverable bitumen reserves increased
120 percent to 242 million barrels. Recoverable 2P plus best estimate total
resources of bitumen (defined below) increased 60 percent to 417 million
barrels, with $6.5 billion of future net revenue and a 10 percent pre-tax
present value of $1.1 billion. Recoverable 3P reserves plus high estimate
total resources of bitumen (defined below) increased 67 percent to 798 million
barrels, with $13.4 billion of future net revenue and a 10 percent pre-tax
present value of $1.6 billion; annual production for this category was
forecast to peak at 60,215 bbl/d in 2022. Future net revenue is calculated
after deduction of forecast royalties, operating expenses, capital
expenditures and well abandonment costs but before corporate overhead or other
indirect costs, including interest and income taxes.
    Estimates of conventional reserves also showed continuing improvement.
After production of approximately 450,000 barrels of oil equivalent ("boe"),
Connacher's conventional 2P recoverable reserves rose 14 percent to 10 million
boe, buoyed by a 27 percent increase in 2P natural gas reserves to 42 Bcf at
June 30, 2007 due to successful winter drilling, primarily at Marten Creek,
Alberta. These 2P reserves were assigned a 10 percent pre-tax present value of
$156 million. There was no evaluation of conventional 3P reserves.
    The estimates as at June 30, 2007 ("GLJ June 2007 Report") were prepared
by independent evaluators, GLJ Petroleum Consultants ("GLJ") of Calgary,
Alberta and in certain instances are compared to reserve estimates provided by
GLJ in a report ("GLJ 2006 Report") with an effective date of December 31,
2006. The GLJ June 2007 Report and the GLJ 2006 Report were prepared using
assumptions and methodology guidelines outlined in the Canadian Oil and Gas
Evaluation Handbook ("COGE Handbook") and in accordance with National
Instrument 51-101 ("NI 51-101").
    Readers are cautioned that the conversion used in calculating barrels of
oil equivalent (6 mcf:1 bbl) is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead. Furthermore, boes may be misleading if used in
isolation. Also, estimations of reserves and future net revenue to be
discussed in this press release constitute forward-looking statements. See
"Forward Looking Statements" below. All references to future net revenue in
this press release are stated before taxes. Future net revenues do not
represent fair market value.

    Bitumen Reserves

    Connacher owns a 100 percent working interest in approximately 95,000
acres of oil sands leases at its Great Divide project, situated approximately
80 kilometres southwest of Fort McMurray, Alberta, and at Half Way Creek,
Alberta, situated 40 kilometres northeast of Great Divide. Several oil
accumulations in the McMurray formation have been identified for development
on the Great Divide leases, including Pod One which contains over 20 metres of
net steam assisted gravity drainage ("SAGD") pay and is currently being
developed. Construction of a 10,000 barrel per day facility at Great Divide is
nearing completion, with start-up of SAGD operations anticipated shortly. A
total of 15 SAGD well pairs have been drilled in conjunction with this
project. Great Divide is located close to existing commercial operations at
Hangingstone and access to the Great Divide is via Highway 63. Additional
details regarding Connacher's development at Great Divide can be accessed at
www.connacheroil.com or at www.sedar.com.
    Recently, Connacher has submitted an application to regulators to develop
the Algar Project ("Algar") in the Great Divide area. Algar is a planned
10,000 bbl/d SAGD project which will require the construction of another plant
and facility by Connacher once approval to proceed has been received. It will
be situated approximately six miles east of Pod One.
    The major development for Connacher since December 31, 2006 was the
completion of the drilling of 81 new core holes on its main lease block at
Great Divide. As a result of this drilling, which was focused on establishing
new project opportunities, the company's 2P and 3P bitumen reserves increased
significantly. There was not as consequential an increase in proved (1P)
reserves as limited drilling was conducted in the vicinity of Pod One,
although proved reserves did increase 22 percent to 53 million barrels. The
related ten percent present value of 1P reserves increased by 62 percent
reflecting the considerable investment in Pod One already completed by
Connacher.
    Connacher's 2P bitumen reserves increased by 111 percent to reach
178 million barrels, compared to 84 million barrels at year end 2006,
reflecting increases at Pod One and new 2P reserve recognition at Algar. The
company's 3P bitumen reserves rose 120 percent to 242 million barrels,
compared to 110 million barrels at year end 2006. Increases were again
allocated to Pod One and new reserves at Algar.
    During 2006, GLJ was able to recognize considerable additional contingent
and prospective resources (as defined in the notes following the table below)
on the Great Divide lands owned by Connacher. This advanced considerably as a
consequence of first half 2007 activity.
    Our 1P and low estimate (as defined in the notes following the table
below) contingent resources increased 63 percent to 114 million barrels,
compared to estimates of 70 million barrels at year end 2006. Connacher's 2P
reserves and best estimate (as defined in the notes following the table below)
contingent resources increased 62 percent to 303 million barrels compared to
year end 2006 estimates of 188 million barrels; 3P reserves and high estimate
(as defined in the notes following the table below) contingent resources were
estimated to have increased 70 percent to 452 million barrels from 266 million
barrels at year end 2006.
    The company's 1P reserves and low estimate total resources (contingent
and prospective) were also estimated at 114 million barrels; 2P reserves and
best estimate total resources were estimated at 417 million barrels and 3P
reserves and high estimate total resources were estimated to have increased
67 percent to 798 million barrels from 479 million barrels at December 31,
2006.
    The GLJ June 2007 Report estimated Connacher's 1P bitumen reserves would
generate $727 million of future net revenue with a 10 percent present value of
$310 million, after deduction of future capital requirements of $316 million
and abandonment costs of $8 million.
    Connacher's 2P bitumen reserves were forecast to generate $2.7 billion of
future net revenue with a 10 percent present value of $683 million, after
future capital of $1.1 billion and abandonment costs of $9 million.
    The Company's 3P bitumen reserves were forecast to generate $4.2 billion
of future net revenue with a 10 percent present value of $777 million, after
future capital of $1.6 billion and abandonment costs of $31 million.
    Our 2P reserves and best estimate contingent resources were forecast to
generate $4.6 billion of future net revenue with a 10 percent present value of
$873 million, after future additional capital to develop the contingent
resources of $2.3 billion and $44 million of abandonment costs.
    Connacher's 2P reserves and best estimate total (contingent and
prospective) resources were forecast to generate $6.5 billion of future net
revenue with a 10 percent present value of $1.1 billion, after future capital
of $3.1 billion and abandonment costs of $59 million. Under this scenario,
future annual production is forecast by GLJ to peak at 40,264 bbl/d in 2029.
    The Company's 3P reserves and high estimate total resources were forecast
to generate $13.4 billion of future net revenue with a 10 percent present
value of $1.6 billion after future capital of $6.7 billion and abandonment
costs of $127 million. Under this scenario, future annual production is
forecast by GLJ to peak at 60,215 bbl/d in 2022.
    The resource volumes have not been classified as reserves at this time,
pending further delineation drilling, development planning, project design and
further regulatory applications. The resource values should be considered
indicative in nature only, pending further design work to confirm timing and
capital estimates.

    Conventional Reserves

    Connacher's conventional reserve base also expanded considerably during
2007.
    Proved natural gas reserves increased 19 percent to 30 Bcf. Proved and
probable natural gas reserves increased 27 percent to 42 Bcf. As there was
limited new drilling for oil during the winter months, crude oil and liquids
reserves declined 15 percent on a 1P basis to two million barrels and only
seven percent on a 2P basis to three million barrels, largely reflecting
production during the period.
    On an oil equivalent basis, 1P reserves remained flat at 7 million boes.
The company's 2P equivalent reserves increased 14 percent to 10 million boes.
    The reports were prepared utilizing GLJ's forecast pricing as at the
effective dates. The GLJ June 2007 Report estimated that Connacher's
conventional 1P reserves would generate $178 million of future net revenue
with a 10 percent present value of $117 million. The company's 2P conventional
reserves were forecast to generate $267 million of future net revenue with a
10 percent present value of $156 million.

    Total Company Combined Reserves (Conventional and Bitumen)

    On a combined basis, Connacher's reserves accordingly grew at very
significant rates since year end 2006. Total 1P equivalent reserves at
June 30, 2007 were estimated by GLJ to be 60 million boes, an increase of
19 percent over year end 2006.
    Connacher's 2P equivalent reserves increased 102 percent to 188 million
boes at December 31, 2006 compared to 93 million boes at year end 2006.
    The company's 2P reserves are forecast to have a 10 percent present value
of $839 million. This represents a 59 percent increase over year end 2006.
    On a per share basis the calculated ten percent present value of total
combined reserves equates to approximately $4.20 per Connacher common share
outstanding, before provision for the value of contingent and prospective
resources as estimated in the GLJ June 2007 Report, before recognition of the
value of other assets of the company and before debt. There are presently
approximately 198 million Connacher common shares outstanding.
    No reserve volumes or future net revenue or present value thereof was
assigned herein to Connacher's 26 percent equity interest in Petrolifera
Petroleum Limited's crude oil and natural gas reserves in Argentina.Summary Tables

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                        Connacher Oil and Gas Limited
      Great Divide and Halfway Creek Bitumen Reserves and Resources (mmbbl)
    -------------------------------------------------------------------------
                                                31/12/06  30/06/07  % change

    Proved (1P)(1)                                    44        53        21
    Proved and Probable (2P)(1)(2)                    84       178       111
    Proved, Probable and Possible(1)(2)(3)           110       242       120
    1P + Low Estimate Contingent
     Resources(1)(4)(6)                               71       114        62
    2P + Best Estimate Contingent
     Resources(1)(2)(4)(7)                           188       303        61
    3P + High Estimate Contingent
     Resources(1)(2)(3)(4)(8)                        266       452        70
    1P + Low Estimate Total Resources (1)(6)(9)      110       114         3
    2P + Best Estimate Total Resources(1)(2)(7)(9)   261       417        60
    3P + High Estimate Total
     Resources(1)(2)(3)(8)(9)                        479       798        67
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                        Connacher Oil and Gas Limited
                       Conventional Canadian Reserves
    -------------------------------------------------------------------------
                 OIL & NGLs (mmbbl)   NATURAL GAS (bcf)   Equivalent (mmboes)

               31/12/  30/06/  %    31/12/  30/06/  %    31/12/  30/06/  %
                  06      07 change    06      07 change    06      07 change

    Proved
     (1P)(1)     2.4    2.2    (15)    25     30     19    6.5    7.1
    Probable(2)  0.8    0.8     (2)     9     13     47    2.2    2.9     30
               -------------        -------------        -------------
    Proved +
     Probable
     (2P)(1)(2)  3.2    3.0     (7)    34     43     27    8.7   10.0     14
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                        Connacher Oil and Gas Limited
             Combined Conventional and Bitumen Reserves (mmboes)
    -------------------------------------------------------------------------
                                                31/12/06  30/06/07  % change

    Proved Conventional(1)                             7         7
    Proved Bitumen(1)                                 44        53
                                                -------------------
    Total Proved (1P)(1)                              51        60        19

    Probable Conventional(2)                           2         3
    Probable Bitumen(2)                               40       125
                                                -------------------
    Total Probable(2)                                 42       128       200

    Proved + Probable Conventional (2P)(1)(2)          9        10
    Proved + Probable Bitumen(1)(2)                   84       178
                                                -------------------
    Total 2P(1)(2)                                    93       188       102
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    -------------------------------------------------------------------------
                        Connacher Oil and Gas Limited
                   10% Present Value of Future Net Revenue
                       Bitumen Reserves and Resources
    -------------------------------------------------------------------------
                                    ($mm)
                                                31/12/06  30/06/07  % change

    Proved (1P)(1)                                   191       310        62
    2P(1)(2)                                         376       683        81
    3P(1)(2)(3)                                      464       777        67
    1P + Low Estimate Contingent
     Resources(1)(4)(6)                              243       410        69
    2P + Best Estimate Contingent
     Resources(1)(2)(4)(7)                           584       873        49
    3P + High Estimate Contingent
     Resources(1)(2)(3)(4)(8)                        814     1,173        44
    1P + Low Estimate Total Resources(1)(6)(9)       487       410       (16)
    2P + Best Estimate Total Resources(1)(2)(7)(9)   778     1,081        39
    3P + High Estimate Total
     Resources(1)(2)(3)(8)(9)                      1,245     1,627        31
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    -------------------------------------------------------------------------
                        Connacher Oil and Gas Limited
                   10% Present Value of Future Net Revenue
                Total Company (Conventional and Bitumen)(10)
    -------------------------------------------------------------------------
                                    ($mm)
                                                31/12/06  30/06/07  % change

    Proved Conventional(1)                           114       117
    Proved Bitumen(1)                                198       303
                                                -------------------
    Total Proved (1P)(1)                             312       420        34

    Probable Conventional(2)                          30        40
    Probable Bitumen(2)                              186       372
                                                -------------------
    Total Probable(2)                                216       412        90

    P+P Conventional (2P)(1)(2)                      144       156
    P+P Bitumen (2P)(1)(2)                           385       683
                                                -------------------
    P+P Total (2P)(1)(2)                             529       839        59
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    Notes:

    (1)  Proved reserves are those reserves that can be estimated with a
         high degree of certainty to be recoverable. It is 90% likely that
         the actual remaining quantities recovered will exceed the estimated
         proved reserves.
    (2)  Probable reserves are those additional reserves that are less
         certain to be recovered than proved reserves. It is equally likely
         that the actual remaining quantities recovered will be greater or
         less than the sum of the estimated proved plus probable reserves.
    (3)  Possible reserves are those additional reserves that are less
         certain to be recovered than probable reserves. There is only a 10%
         probability that the quantities actually recovered will equal or
         exceed the sum of proved plus probable plus possible reserves.
         Possible reserves were 25.7 million barrels in the GLJ 2006 Report,
         and 64.4 million barrels in the GLJ June 2007 Report.
    (4)  Contingent resources are those quantities of oil and gas estimated
         on a given date to be potentially recoverable from known
         accumulations but are not currently economic. GLJ has categorized
         these resources as contingent as additional delineation drilling,
         development planning, project design and further regulatory
         applications are required.
    (5)  Prospective resources are those quantities of oil and gas estimated
         on a given date to be potentially recoverable from undiscovered
         accumulations. If discovered, they would be technically and
         economically viable to recover. There is no certainty, however, that
         prospective resources will be discovered.
    (6)  Low Estimate is considered to be a conservative estimate of the
         quantity that will actually be recovered from the accumulation. If
         probabilistic methods are used, this term reflects P90 confidence
         level.
    (7)  Best Estimate is considered to be the best estimate of the quantity
         that will actually be recovered from the accumulation. If
         probabilistic methods are used, this term is a measure of central
         tendency of the uncertainty distribution (P50).
    (8)  High Estimate is considered to be an optimistic estimate of the
         quantity that will actually be recovered from the accumulation. If
         probabilistic methods are used, the term reflects a P10 confidence
         level.
    (9)  Total resources includes contingent resources and prospective
         resources.
    (10) Tables may not add due to rounding.Connacher Oil and Gas Limited is a Calgary-based crude oil and natural
gas exploration and production company. Its primary asset is comprised of its
oil sands holdings in the Great Divide region of northeastern Alberta. Great
Divide Pod One (10,000 bbl/d) is approaching the commissioning phase and
recently Connacher applied to develop its second 10,000 bbl/d project at
Algar, about six miles east of Pod One. The company also owns conventional
crude oil and natural gas properties in western Canada, a 9,500 barrel per day
refinery in Montana and owns twenty six percent of Petrolifera Petroleum
Limited (PDP-TSX), a company active in the oil and gas business in South
America.

    Forward Looking Statements

    This press release contains forward-looking statements, including but not
limited to estimated reserves and future net revenues, future capital
expenditures, estimated well abandonment costs and anticipated production.
These statements are based on current expectations that involve a number of
risks and uncertainties, which could cause actual results to differ materially
from those anticipated. 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 and the risk associated with changes in legislation related to
royalties, taxation and environmental matters. Additional risks and
uncertainties are described in the company's Annual Information Form which is
filed on SEDAR at www.sedar.com.

    The reserves and future net revenue in this press release represent
estimates only. The reserves and future net revenue from the company's
properties have been independently evaluated by GLJ with effective dates of
June 30,2007 and December 31, 2006, respectively. These evaluations include a
number of assumptions relating to factors such as initial production rates,
production decline rates, ultimate recovery of reserves, timing and amount of
capital expenditures, marketability of production, future prices of crude oil
and natural gas, operating costs, abandonment costs, royalties and other
government levies that may be imposed during the producing life of the
reserves. These assumptions were based on price forecasts in use by GLJ at
June 30, 2007 and at December 31, 2006. Many of these assumptions are subject
to change and are beyond the control of the company. Actual production, sales
and cash flows derived therefrom will vary from the evaluation and such
variations could be material. The present value of estimated future net cash
flows referred to herein should not be construed as the current market value
of estimated crude oil and natural gas reserves attributable to the company's
properties. There can be no assurance that prospective resources will be
discovered or that contingencies relating to the contingent resources will be
satisfied such that these resources may be classified as reserves. Estimates
of future net revenue do not represent fair market value.

    Due to the risks, uncertainties and assumptions inherent in
forward-looking statements, prospective investors in the company's securities
should not place undue reliance on these forward-looking statements. Forward
looking statements contained in this press release are made as of the date
hereof and are subject to change. The company assumes no obligation to revise
or update forward looking statements to reflect new circumstances, except as
required by law.