TORONTO (Standard & Poor's) Oct. 10, 2008--Standard & Poor's Ratings Services 
today said it raised its issue-level rating on Calgary, Alta.-based Connacher 
Oil and Gas Ltd.'s US$600 million second-lien senior secured eight-year notes 
to 'BB+' from 'BB', and revised the recovery rating on this debt to '1' from 
'2'. The '1' recovery rating indicates an expectation for very high (90%-100%) 
recovery in the event of a payment default. (For the complete recovery 
analysis, please see "Connacher Oil and Gas Ltd.'s Recovery Rating Profile," 
to be published on RatingsDirect immediately following this report.)
     At the same time, Standard & Poor's affirmed its 'BB-' long-term 
corporate credit rating on the company. The outlook is stable. 
     The affirmation follows our review of the company's liquidity situation. 
"With the announcement that the company will shelve plans for a refinery 
expansion and limit capital spending on its existing operations to maintenance 
levels, we believe Connacher has the funds available to complete its Algar 
project while maintaining its financial profile within the 'BB-' rating 
category," said Standard & Poor's credit analyst Jamie Koutsoukis. The upgrade 
on the notes is the result of the company's reported increased reserves, which 
are pledged as security on a second-lien basis on the notes. "The incremental 
value attributed to the additional reserves raised our assessment of the 
company's enterprise value at default," Ms. Koutsoukis added.
     Connacher is an oil and natural gas exploration and production company 
whose principal asset is its 100% interest in approximately 98,000 acres of 
oil sands leases in the Great Divide and 50% interest in Halfway Creek regions 
near Fort McMurray, Alta. Production from Connacher's first pod began during 
third-quarter 2007 and should reach 10,000 barrels per day (bbl/d) of bitumen 
in late 2008. Connacher also has conventional operations primarily at Battrum, 
Sask., and in Marten Creek, Simonette, and Three Hills, Alta., with production 
of 3,351 barrels of oil equivalent per day in second-quarter 2008 (ended June 
30). The company operates a 9,500 bbl/d refinery in Great Falls, Mont., and 
owns about 24% of Petrolifera Petroleum Ltd., which has interests in 
Argentina, Peru, and Colombia. 
     The stable outlook reflects our expectation that Pod I of Connacher's 
Great Divide project will reach production at its design capacity by year-end 
2008, and internally generated cash flows will meet the company's debt and 
sustaining capital expenditure commitments for its operating assets. 
Furthermore, the outlook incorporates our expectation that Connacher will 
complete the development of its Pod 2 Algar project on schedule without any 
material cost increases or any need for significant additional funding. We do 
not expect, however, that Connacher's balance sheet will materially improve in 
the near-to-medium term as it begins spending on Algar. Should Connacher 
encounter pressure on its liquidity due to project cost escalations, or the 
company not see increased internal cash flow during the next 12 months as to 
reduce total debt to EBITDA below 7.0x, a negative rating action could occur. 
Conversely, an outlook revision to positive depends on the company's ability 
to significantly reduce its debt, combined with improvements in free cash flow 
generation, which is unlikely until Algar is completed and producing.