CALGARY, Sept. 29 /CNW/ - Connacher Oil and Gas limited (CLL - TSX) announces today that bitumen production at its Great Divide Pod One steam -assisted gravity drainage ("SAGD") oil sands plant continues to ramp up following a recently-completed mandated turnaround and recently reached 9,750 barrels per day. This production level is within 250 barrels per day of the original design capacity of the plant and was achieved with fourteen of fifteen well pairs contributing to recorded volumes. Steam is presently being injected into the fifteenth well pair and it is anticipated this well will also be placed onstream once critical down hole temperature conditions have been established in the related wellbores. When combined with current conventional production of approximately 3,600 boe/d, Connacher's total production has now surpassed 13,350 boe/d, a record for the company.

Connacher also notes that an electrical submersible pump has also been installed in one of the fourteen well pairs and following a monitoring period, additional pumping equipment may be installed in other well pairs. It is anticipated these installations would allow wells to produce with greater consistency at lower pressures and therefore lower steam/oil ratios ("SOR'S"). Lower SORS would contribute to the continued lowering of unit operating costs over time.

Thus far in the third quarter 2008, Connacher is experiencing strong cash flow from operations before changes in working capital as a result of the significant and growing contribution of its conventional production and its bitumen production at Pod One. The impact of these volume increases in recent months has been reinforced by continuing reductions in related unit operating costs, especially for bitumen production. In August 2008, for example, these unit operating costs were estimated to have been reduced to under $20 per barrel, which were well below levels recorded during the earlier stages of our rampup at Pod One. Further unit operating cost improvements are anticipated as 2008 progresses, as our recent volume rampup will spread associated fixed costs over our larger production base. Unit operating costs for our total production base, including conventional and bitumen production, were estimated to have been even lower at approximately $16.00 per boe in August 2008. These lowering of costs, together with strong second half 2008 selling prices, have provided the basis for much improved wellhead or plant gate netbacks for bitumen and overall production and for resultant corporate cash flow from operations before working capital changes.

Readers should note that terms such as netbacks and cash flow from operations before working capital changes are non-GAAP terms and that the use of the term barrel of oil equivalent ("boe") may be misleading if used in isolation. Refer to the Forward-Looking Information Statement at the end of this press release for further advice and clarification in this regard.

Recently, statements have been made by the ruling Conservative Party of Canada during the current Canadian election campaign suggesting that a "re-elected Harper Government will prohibit the exportation of bitumen outside of Canada for upgrading in order to take advantage of lower pollution or greenhouse gas emissions standards elsewhere." While this is not yet official policy as the outcome of the election remains to be determined and is seemingly focused on bitumen sales to markets outside North America, Connacher can advise that it anticipates selling little, if any, raw bitumen anywhere and that virtually all of its current sales, which primarily consist of diluted bitumen ("dilbit"), have been made and are being made in Canada, primarily to Canadian purchasers which are also operators of integrated upgrading facilities in the general vicinity of Connacher's Pod One operations. Furthermore, Connacher currently purchases Bow River heavy crude oil produced in southern Canada for its refinery at Great Falls, Montana. Our refinery operates effectively and safely within the framework of very strict environmental standards as established by US Federal and Montana State agencies.

Connacher is conducting front-end engineering and design ("FEED") studies relating to a potential expansion over several years of the daily throughput capacity of its Montana refinery from approximately 9,500 bbl/d to approximately 35,000 bbl/d. This study is now scheduled to be completed sometime in 2009, at which time Connacher's management will assess the merits of such an expansion in the context of anticipated costs, anticipated investment returns, together with prevailing and anticipated conditions for both financial markets and product markets. If warranted, the matter would then be brought forward for consideration by the company's Board of Directors. A final decision whether or not to proceed will depend upon these and other factors, which will be assessed at the appropriate time, which remains solely within Connacher's determination as it owns 100 percent of the refinery as well as most of its upstream operations.

Connacher also continues to examine various pipeline alternatives as a longer-term solution to the requirement of transporting growing Great Divide dilbit production to available markets. Presently Connacher trucks its dilbit to available markets. A decision on which alternative to pursue will likely be arrived at after construction is initiated at the company's second 10,000 bbl/d Great Divide project at Algar, for which regulatory approval is believed to be imminent. Once the regulatory approval is issued by Alberta's Energy Resources Conservation Board, further formal approval by the Alberta Cabinet through the issuance of an Order-in-Council is required. It is anticipated this should happen as quickly as the item can reach the Cabinet's Agenda, following which Connacher will be authorized to proceed with field construction.

Connacher Oil and Gas Limited is a Calgary-based crude oil, natural gas and bitumen exploration and production company. It also owns a 9,500 bbl/d heavy oil refinery located at Great Falls, Montana and a 24 percent equity stake in Petrolifera Petroleum Limited. Connacher's common shares and convertible debentures are listed for trading on the Toronto Stock Exchange.

Forward-Looking Information:

This press release contains "forward-looking information" including: the timeline for placing the fifteenth well pair onstream at Pod One; anticipated installation of additional electrical submersible pumps in existing wellbores at Pod One resulting in more consistent production at lower pressures and resultant steam/oil ratios and related operating costs; further anticipated operating cost reductions at Pod One arising form continued production increases compared to those thus far recorded in 2008 year-to-date; Connacher's intention with respect to raw bitumen sales; the anticipated timing of completion of the frond-end engineering and design studies related to the potential expansion of the company's Montana refinery and the timing of consideration of the merits of the refinery expansion by Connacher's Board of Directors; the timing and selection and financing of a pipeline alternative to transport the company's production from Great Divide Pod One and other similar projects to market as an alternative to the company's current practice of trucking diluted bitumen to available markets; development of additional oil sands projects (including receipt of regulatory approvals in respect of Algar) and anticipated financial and operating results for the third quarter of 2008. Forward-looking information is frequently characterized by words such as "plan", expect", "project", "intend", "believe", "anticipate", estimate", "may", "will", "could", "potential", "proposed" and other similar words, or statements that certain events or conditions "may" or "will" occur. These statements are only predictions. Forward-looking information is 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, difficulties or delays during construction and in start-up operations following the turnaround, the uncertainties involved in interpreting drilling results and other geological data, fluctuating oil prices, the possibility of 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, construction, start-up, approvals and the continuing ability to access sufficient capital from external sources if required. Actual production levels at Great Divide Pod One and the timelines associated therewith and the timeline for receipt of regulatory approval in respect of Algar may vary from those anticipated in this press release and such variations may be material. Additionally, financial and operating results for the third quarter of 2008 are dependent on, among other things, actual commodity prices realized by the company and maintenance of current operating costs in an inflationary environment. Readers are reminded that cash flow and cash flow from operations and total netbacks and per unit netbacks do not have standardized meanings prescribed by Canadian generally accepted accounting principles ("GAAP") and therefore may not be comparable to similar measures used by other companies. Cash flow is calculated before changes in non-cash working capital, pension funding and asset retirement expenditures. The most comparable measure calculated in accordance with GAAP would be net earnings. Cash flow is commonly used in the oil and gas industry and when actual amounts are presented, reconciliation with net earnings is provided by the company. Total netbacks by product are calculated by deducting the related diluent, transportation, field operating costs and royalties form revenues. Unit netbacks are calculated by dividing total netbacks by production volumes. Total netbacks are usually reconciled to net earnings when actual amounts are presented. All references to barrels of oil equivalent (boe) are calculated on the basis of 6mcf:1bbl. Boes may be misleading, particularly if used in isolation. This conversion is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. For a 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, 2007, which is available at www.sedar.com. Connacher undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change, unless required by law. Due to the risks and uncertainties inherent in forward-looking information, the reader is cautioned not to place undue reliance on this forward-looking information.

For further information: Richard A. Gusella, President and Chief Executive Officer, Grant D. Ukrainetz, Vice President, Corporate Development, Phone: (403) 538-6201, Fax:(403) 538-6225, inquiries@connacheroil.com, Website: www.connacheroil.com