I am concerned that there has been a need on this board for some time to be realistic about the production from POD 1, and SAGD production in general. I think that Connacher shareholders look at its "design capacity" of 10,000 bbl/d of bitumen and see anything less as somehow a failure of the technology or managements being deceptive. In reality, the SAGD business, and the heavy oil business in general is a difficult place to make money as it is 1) very capital intensive; and 2) requires state of the art technology which continues to evolve. As many of us have found out over the last number of years investing in a small scale oil sands operation is not for the faint at heart.

If you look as the history of small scale oilsands operations in the market place you will see that none of them have been as successful as Connacher's current POD 1 in terms of their production. If we look at Deer Creek's (now Total's) Joslyn SAGD operation. Joslyn was built with a 10,000 bbl/d bitumen design capacity but on May 18, 2006 the steam from one well pair blew through the caprock above the steam chamber thereby releasing steam into the atmosphere, and the 17 producing well pairs were restricted by the ERCB to producing 6,200 bbl/d of bitumen with a production profile at 1200 kPA. The ERCB ordered Joslyn to shut down at least one well pair and reduce the steam produced by all of the other wellpairs. http://www.altavista.com/web/results?itag=ody&q=Deercreek+Joslyn&kgs=1&kls=0 Total is currently shutting down the Joslyn SAGD operation as it never reached it's 10,000 bbl/d bitumen design capacity.

Japan Canada Oil Sands Limited or JACOS built it's Hangingstone SAGD operation with a 11,000 bbl/d bitumen design capacity just north of Connacher's POD 1. JACOS operates 19 well pairs which produce approximately 8,000 bbl/d bitmen. http://www.jacos.com/CurrentOperations.htm The Hangingstone project has been in operation since July 1999 and is producing about 3,000 bbl/d bitumen under its design capacity. http://www.jacos.com/Documents/JACOS-Expansion-Press-Release.pdf

Connacher's Great Divide POD 1 has a design capacity of 10,000 bbl/d bitumen, and management has stated that it will have an operating capacity of 9,000 bbl/d bitumen. It is according to Connacher's latest presentation on page 19, currently producing 8,177 bbl/d bitumen as of March 2010. On page 20 of the presentation Connacher's guidance (which they never give by the way) forecasts 2010 POD 1 production at 8,555 bbl/d bitumen. http://www.connacheroil.com/en/documents/presentation/cll-2010-04-ppt-web.pdf

We all need to be more realistic on Connacher's production in terms of what Connacher has accomplished so far at POD 1 and what it can be going forward. Connacher has been the most successful small scale SAGD bitumen producer so far to date in Alberta/Sask. Connacher has come a lot closer to POD 1's design capacity than either Total (Deer Creek) or JACOS so far. This is no small accomplishment. SAGD production is not an exact science(fine tuning its well pairs each hour and each day is akin to continually tuning a 12 cylinder Ferrari engine). Page 32 of the presentation shows that new technologies that Connacher will use going forward to increase the production at POD 1 even higher, in addition to lowering the Steam Oil Ratio (SOR) at POD 1 which is shown on page 20.

We need to be a lot more realistic about Algar's production once it comes on line and take a conservative approach and not forecast ridiculous amounts of production. We will have to wait and see what production will be, knowing that there will be quirks in production and that fine tuning will be necessary along the way and that there will be stoppages in production to install high temperature ESP's as well as plant shut downs to clean out vessels etc. and permit inspections. Bitumen production is a tough business!

Best Wishes; Scott