Hi Sharky;

I agree with you that management should put off the expansion and achieve full production first. Full production is 9,000 bbl/d of bitumen at POD 1 and 9,000 bbl/d at Algar. No SAGD plant we decided on this board a long time ago can run at design capacity and Connacher management stated this as well in 2010.

Getting the SOR's [Steam Oil Ratio] down to below 3.0 is also essential to a cost effective operation. Connacher management to their credit is making great strides in this area by co-injecting methane with the steam into the five wellpairs on the northern well pad at POD 1 in order to lower the SOR's there and divert excess steam to the other wellpairs with higher SOR's and lower production. At the same time management have also asked the ERCB for permission to start injecting solvent with the steam into the wellpairs on one well pad at Algar. The addition of the co-generation plant at Algar also produces a surplus of 3700 bbl/d of steam which the Q3 Report stated can be directed to weaker producing wellpairs at Algar in order to increase production. To date production is steadily increasing towards full production of 9,000 bbl/d of bitumen at POD 1 and the same at Algar.

Management has also learned how to dodge the yearly plant shut for a week by cleaning out and maintaining vessels in both plants on the fly, however I expect Algar will have to shut down for a week over the next year in order for the government inspectors to make sure everything in the plant is up to specification during Algar's first year of operation. So we are doing fine on the production side; and the construction of a substation at POD 1 by the area power company will go far to stabolize POD 1's continuous power supply (Algar already being islanded from the area power grid due to the co-generation plan on it's plant site.)

I have heard analysts on both BNN and on CNN this week stating that oil should be around the $85 to $90 dollar range for 2011 and that it will spike to $100 a barrel WTI on occassion, so it looks like the price of oil should co-operate and Connacher's hedging program hopefully will for the most part protect Connacher from the down side. The differential between bitumen and WTI sweet crude is narrowing and getting back to where it was before the Enbridge pipelines were shut down due to leaks. So hopefully with a fairly high oil price, a low bitumen to WTI differential through out 2011 and increasing production and reliability at both POD 1 and Algar, Connacher will be stocking up the funds in its war chest. I agree with you Sharky that the expansion should be put off until the share price increases to at least over $2.00 a share as Connacher builds up it's cash reserves. Once the share price is at least double what it is now, then management should think about how it will raise funds for the expansion. Management needs to save as much cash as it can going forward so that this will increase the share price. Once the share price is a lot higher then they can pay off the $100mm debentures in June 2012 by issuing more shares to the banks. This will preserve Connacher's cash situation as fewer shares can be issued due to the higher share price, and Connacher can still hang on to the cash that it saves up during 2011 and 2012 in order to keep the value of the shares up. The only thing that management should be spending any of Connacher's cash war chest on over the next two years is on the winter drilling program as this will significantly increase Connacher's bitumen reserves which will also stabolize the share price. Then with a large cash reserve in the war chest, and a higher share price; then and only then should management try to renegotiate the debt or take on a venture partner in order to get the cash for the 24,000 bbl/d expansion at Algar. The cash raised through a joint venture for 25 to 30% of the expansion project profits would be ok with me. Connacher shareholders would still control 100% of POD 1, 100% of Algar and 70% to 75% of the expansion. It might even be better to structure a joint venture so that Connacher's joint partner ends up owning percentages of POD 1 and Algar and a lower percentage of the expansion project due to the fact that POD 1 and Algar will be mature and need more development capital to keep up their production in a couple of years whereas the expansion project would be newer and in increased production mode then. Anyway, these are my thoughts on the future path for Connacher IMHO.

Cheers; Scott