The following information is on the SEDAR website dated May 19 and appears in Connacher's preliminary short form perspectus:

http://www.sedar.com/GetFile.do?lang...

Recent Developments

Operational Update

" On January 21, 2009, Connacher announced the resumption of bitumen production ramp-up at Pod One as narrower heavy oil differentials, new marketing arrangements with regional upgraders, reduced diluent costs and WTI hedges arranged to take advantage of contango (i.e. future crude prices higher than spot prices) in the future price of crude oil resulted in improved bitumen wellhead prices in excess of $25/bbl with WTI in the U.S.$40/bblrange. This followed the decision resulting from the collapse of crude oil prices and other factors, which adversely impacted the economics of bitumen production in December 2008, to curtail bitumen production to approximately 4,200 bbl/d. During the subsequent bitumen production ramp-up process, new bottlenecks relating to temperature and pressure drops were encountered concurrent with the SAGD plant realizing its highest ever steam injection rates. These bottlenecks resulted in increased pressure in the SAGD wells, which partly constrained the production volume ramp-up. The Corporation anticipates that this issue will be mitigated, both on surface and in the reservoir, with the installation and subsequent operation of four additional electrical submersible pumps ("ESPs") which was completed in April 2009. The installation procedure for the ESPs required the cooling and shut-in of the applicable four SAGD well pairs, which in turn temporarily reduced overall bitumen production rates at Pod One for approximately one week. Connacher anticipates that the five ESPs installed to date will reduce SORs over time as has occurred in the first well into which an ESP was installed, with SORs as low as 2.2x being recorded. The Corporation is also focusing on efficient power solutions, including the use of a cogeneration facility. Thecombination of these two initiatives is designed to reduce the carbon footprint associated with the Corporation's SAGD operations. After the four additional ESPs were installed and became operative, Pod One production reached 10,422 barrels of bitumen for one day during the third week of April 2009. This occurred during a test to identify potential incremental facility bottlenecks that could occur at higher production and injection rates. The level of bitumen production achieved during the test was not expected to be a sustainable rate as the operating conditions continue to be revised. Bitumen production levels were subsequently reduced, as going forward, the Corporation intends to adopt a measured ramp-up to the Pod One design capacity. This steady state approach is anticipated to ultimately result in higher sustainable production rates and the realization of lower long term SOR goals in the range of 2.6x - 2.7x, through continuing optimization and careful reservoir and plant management. Current bitumen production levels are approximately 7,500-8,000 bbl/d and improving.

The two additional SAGD well pairs which were drilled in the first quarter of 2009 are presently undergoing steam circulation in both the injector and producer well bores, as part of the pre-heat stage. Later in June 2009 or July 2009, they will be converted to full-SAGD operation and begin contributing to ongoing Pod One bitumen production levels. The Corporation anticipates achieving production design capacity of 10,000 bbl/d at Pod One later in 2009. The Corporation's annualized target is to operate at 95 percent of design capacity (i.e. averaging 9,500 bbl/d) on an on-going basis, after giving effect to fluctuations in daily bitumen production volumes due to factors such as weather, unplanned operational upsets, workovers and other events that normally occur in the operation of a SAGD plant.

During the first quarter of 2009, the Corporation also focused its attention on reducing bitumen operating costs at Pod One, given weak commodity prices and reduced production volumes. The Corporation reduced its bitumen operating costs to under $20.00/bbl in both February and March this year and anticipates even lower levels during the balance of the year, depending on natural gas prices. During the first quarter of 2009, the Corporation's upstream unit operating costs, including those related to conventional oil and gas, were $17.73/boe, reflecting in part increasing efficiency achieved in producing bitumen, with only approximately one year of operating experience.

During the first quarter of 2009, the Refinery completed its US$20 million ultra low sulphur diesel project. Due to downtime required to tie-in the new hydrogen plant to complete this project and as a result of certain operational upsets due to significant cold weather conditions, throughput volumes were lower in the fourth quarter of 2008 and the first quarter of 2009 than in prior quarters. Refinery utilization rates averaged only 72 percent (or 6,867 bbl/d) in the first quarter of 2009. The Corporation anticipates restoring utilization rates to higher levels during the balance of the year, excluding downtime relating to the scheduled one-month turnaround commencing in mid-September 2009. Current Refinery throughput is approximately 9,950 bbl/d, representing a utilization rate of greater than 100 percent.

In addition to improved utilization rates or throughput, the Corporation anticipates an improved full year contribution from its refining operations due to increased demand for asphalt, resulting from new infrastructure plans proposed by the U.S. federal government and the State of Montana and a shortage of asphalt that currently exists throughout the United States. Recently, the Corporation completed sales of asphalt for US$78 per barrel and the Corporation has contracts for in excess of 250,000 barrels of asphalt (approximately 25 percent of planned production) at an average price in excess of US$100 per barrel.

Capital Spending Program Update

In December 2008 the Corporation announced the suspension of construction of Algar due to deteriorating market conditions and a decision to preserve capital during a time of economic uncertainty. Notwithstanding the suspension of construction, certain activities, including the fabrication of long-lead order equipment and civil work at the Algar plant site and preparation of the three SAGD well pad sites, continued. This work was substantially completed during the first quarter of 2009 in order to avoid the possibility of prolonged delays in the project’s overall timeline once it is reinstated.

The Corporation currently estimates the total capital cost of Algar to be approximately $359 million for site, plant, wells and associated infrastructure, including $14 million of costs associated with the temporary suspension of construction. Cost estimates for Algar are higher than the $272 million cost of Pod One due to: Pod One's further distance from Highway 63, the main paved highway in the area; the addition of waste treatment recycling capabilities that will also serve Pod One; the construction of an additional well pad required to optimize reservoir management; the prospective facilitation of future plant expansion to process incremental future production as well as costs associated with the suspension of construction. To date, approximately $150 million, approximately 42 percent of the estimated total capital cost, has been invested in Algar, primarily for the off-site fabrication of long-lead SAGD plant components and equipment, the construction of the access road from Highway 63 to the Algar plant site and civil work at the plant and well pad sites. A further $10 million is expected to be spent on the project prior to reinstatement to satisfy remaining capital commitments, including remaining costs associated with the suspension. The following chart depicts the break-down of the budgeted capital cost of Algar of approximately $359 million.

The conditions in late 2008 that led to the suspension of the Algar project, namely a deterioration in WTI crude oil prices to the US$35/bbl - US$40/bbl range, freezing of capital and credit markets and an economy that was mired in a deep recession, have significantly abated. While a decision to reinstate construction at Algar and drill 15 SAGD well pairs has not yet been made, the Corporation, in accordance with its strategy to pre-fund capital projects, will add to its liquidity through the net proceeds of the Offering to position itself to reinstate Algar in a timely manner. Upon reactivation, the Corporation anticipates a reasonably predictable completion timetable of approximately 275 days. This would be followed by requisite plant commissioning and steaming of the SAGD well pairs, which would require additional time of approximately 120 days, prior to commencing Algar production and ramp-up to full plant capacity of 10,000 bbl/d of bitumen. The Corporation estimates that it will cost approximately $200 million to complete Algar upon reinstatement. However due to the recent cancellation and deferral of a number of oil sands projects in the Fort McMurray region, the actual costs for labour, services and equipment may lower the cost estimates used in the Algar budget, providing a built-in contingency. Should Algar proceed, the Corporation anticipates continuing to mitigate risks through the implementation of cost controls and the on-time completion of projects by utilizing personnel with heavy oil experience, applying modular construction techniques, adopting an oilfield approach, instead of a mega-project mining approach and capitalizing on the efficiencies associated with the construction of smaller scale projects. The Corporation's original budgeted capital expenditure program for 2009 was reduced from $373 million to $124 million in response to lower commodity prices and general economic conditions, including weak or inaccessible capital and credit markets. Of this lower amount, $64 million was spent during the first quarter of 2009, leaving a remaining balance of $60 million, primarily relating to maintenance expenditures, including the cost of the scheduled Refinery turnaround. The revised budget did not include costs relating to the reinstatement of Algar. "

Best Wishes; Scott