Connacher Installs Pumps at Great Divide Project

Connacher O&G provided an operational update, primarily with respect to its activities at Pod One and Algar, both within its Great Divide oil sands project in northeastern Alberta.

We have now installed pumps in 17 of the 19 well pairs at Great Divide Pod One. This includes five progressive cavity pumps on our northern wells, three high temperature electrical submersible pumps ("ESPs") and eleven conventional ESPs. It is anticipated that as regular ESPs achieve their economic life, they will be sequentially replaced with high temperature ESPs in the normal course. The remaining two new wells are on gas lift as they have just been brought onstream, so that all 19 wells are now producing, with the new wells in the early ramp up stage. With the installation of pumps in 17 wells and the startup of production in the last two wells, we are also now ramping up steam production at Pod One and anticipate continued production increases and declining steam:oil ratios throughout the balance of 2010. Last week we recorded average daily production of 7,333 bbl/d at Pod One, an increase of approximately five percent from the prior week. Now that our field work is largely completed and assuming there are no further significant power outages or interruptions for the balance of the year, our goal is to achieve an average daily production rate of approximately 7,200 bbl/d for full year 2010 at Pod One, having averaged 6,572 bbl/d during the first half 2010.

Our ramp up at Algar continues on trend and at a record rate. We commenced converting wells to full steam-assisted gravity drainage ("SAGD") production in early August 2010. Last week we converted two additional wells to full SAGD production. We now have nine well pairs on full SAGD production and seven more well pairs are on steam circulation.

At a new SAGD facility such as Algar, the conversion to full SAGD and ramping up of production is a sequential process during approximately the first full year of operation. Currently, our measured volumes of bitumen production are approaching 3,000 bbl/d. As additional wells are converted to full SAGD production and ramp up towards their productive capacity, this volume will increase. Readers are advised that we will not record these volumes in our reported financial and operating results until we have concluded commerciality for the Algar project, anticipated to occur sometime around the beginning of the fourth quarter 2010. In the interim, we record the volumes for royalty purposes and we capitalize sales proceeds and related operating costs. We are forecasting an average annual daily production rate of approximately 1,800 bbl/d for Algar, arising from expected average daily production rates during the fourth quarter 2010 and the assumption of commerciality effective October 1, 2010.

On a combined basis, we are forecasting a December monthly exit rate for Pod One and Algar bitumen sales of between 15,500 bbl/d and 16,500 bbl/d.

Our Algar cogeneration facility is in the final stages of commissioning and is expected to commence operations in early September 2010. This facility will provide all the power requirements for Algar will eliminate any reliance on the nearby grid and will eventually be able to produce excess power for sale into the grid once a nearby substation, presently under construction, is completed by the regional power provider. These developments should accordingly enhance power reliability for Pod One and eliminate the end-of-line issues which affected our operations, especially during the second quarter 2010. Also, weather related issues such as electrical storms should be diminished as we move into cooler conditions in the area.

We continue to achieve fairly steady conventional production in Alberta and Saskatchewan and our Montana refinery is experiencing very positive operating and preliminary financial results during the summer months.


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