Hi all;

We've got some good responses so far. Let's see how far we can go with our predictions for the next couple of days.

Spiderman8 you said that Connacher will keep some of it's conventional assets. I see no reason for this as management has already stated that there is a glut of natural gas in North America due to all of the shale gas drilling that has taken place and natural gas prices will remain low for years. If management has decided to sell Marten Creek and Randall specifically due to the low value of natural gas for the foreseeable future then their logic applies to all of their natural gas holdings, so I see no reason for Connacher to hold on to any of it's remaining natural gas assets. Without development money these production assets will only continue to decline further.

In terms of the MRC refinery being sold, believe; you asked if it would be easy to sell the refinery and if a buyer could be found. According to the following site: http://www.eia.doe.gov/neic/rankings/refineries.htm the MRC refinery isn't the smallest refinery in the USA. There are 11 refineries smaller than it at present in the USA and it could be expanded by a new buyer. Connacher has already done an expansion feasibility study to epand the plant. As we all know, MRC is a very versatile refinery in a niche market which supplies Montana and the surrounding states with many products. It showed a 12% profit margin in Q-3 of 2010 and it is profitable at present to a potential buyer. Connacher has also updated the refinery since it purchased it by adding a low sulpher diesel unit as well as updating and replacing other parts of the plant so I do not forsee any problem in selling off the refinery. Connacher will be able to sell the refinery for a lot more than they originally paid for it. I don't see any reason for retaining the refinery beyond 2011. The refinery was bought by Connacher as a hedge as it has added to Connacher's cash flow when the price of bitumen fell too low during 2010. But with the narrow differential between the bitumen and WTI price returning at present, and with a WTI or Brent Crude price forecast at over $100 per bbl for 2011 Connacher can afford to ditch the refinery, and adopt a hedging program modeled after the one that Crescent Point Energy has successfully used (as well as other successful energy companies) by forward selling portions of it's production ahead 3 years.

In terms of the reverse share split on a 6 for 1 basis, I think that Connacher will be forced to do this if they don't accept a joint venture partner going forward in order to raise the capital needed for the first 12,000 barrel expansion in 2012 or 2013. Spiderman you put the price of a 12,000 bbl/d expansion at about $450 million dollars. I originally stated that by doing a reverse share split at the rate of 6 to 1 that Connacher could then sell say 50 million shares to raise $266 million dollars. I also stated that the rest of the capital for the expansion would come from Connacher's growing cash flow over 2011 going forward as Connacher ramps up production to 17,000 barrels and the price of oil goes above $100. With the sale of the MRC refinery and conventional assets going to pay down debt, and the winter drilling program increasing Connacher's bitumen reserves, together these will raise the share price. The reverse share split would give Connacher 80 million shares at $7.98 per share based on Friday's share price (6 x $1.33 = $7.98). By selling the conventional assets and the refinery, (to pay down debt), this would be a catalyst in the market to drive this share price higher, in addition to a rising bitumen netback with oil going over $100 WTI for 2011, and a successful core drilling program this winter. With a share price going higher from $7.98 and with Connacher renegotiating it's long term debt over 25-30 years, Connacher will then be in a position to again sell shares to raise equity. With only 80 million shares and it's increasing cash flow Connacher will be in a position to sell shares to finance the expansion itself. How many shares it decides to sell in 2012 would be based on how much of the $450 million dollars it cannot cover from it's existing cash flow and cash savings at that time.

We also need to keep in mind that the Great Divide project will be 3 years old in September 2011. I seem to recall, and 2Crude can correct me on this if I am wrong, that the original well pairs at POD 1 last about 7 years approximately and then they will need to be replaced by drilling new well pads in another section at pod 1. This will cost millions of dollars to do in addition to the millions of dollars which have to be spent doing infill drilling at POD 1 during the remaining 4 years as seen on page 39 of the November 2010 Presentation. http://www.connacheroil.com/en/documents/presentation/cll-2010-11-ppt.pdf So a additional large sum of money will be needed around the time the first 12,000 bbl expansion project is completed at Algar to maintain POD 1's current production level's.

So to sum up Connacher has 3 ways to financially move ahead in 2011.

1) A venure partner can be taken in to provide expansion capital for Connacher to finance the first 12,000 bbl expansion at Algar, and to pay off Connacher's debt.

2) A reverse share split of 6 existing shares for 1 new share in Connacher which will boost Connacher's share price to $7.98 a share with a total of $80 million shares. Connacher can then use its exisiting cash flow and cash reserves built up during 2011 (with an oil price over $100 WTI) to pay for part of the 12,000 bbl expansion at Algar and raise the rest of the $450 million dollars needed for the expansion by selling more shares. Connacher will still have to renegotiate it's $860 million dollar debt over 25-30 years at a lower interest rate, and the sale of MRC and all of the conventional oil and gas assets will go to pay down debt.

3) Connacher can sell off the Batrum conventional oil property and Martel/Randall natural gas properties and keep everything else that it owns. This money $50 million from Battrum plus what ever it gets for Martel/Randall, will go to pay down some of the $860 million dollar debt, and hopefully Connacher can renegotiate it's debt at a lower rate over 25 to 30 years. Connacher can then use it's increased cashflow during 2011 (due to $100 + WTI oil price) to build up it's cash reserves to pay for part of the $450 million dollar, 12,000 bbl Algar expansion and borrow the rest of the money for the expansion and infil drilling program and replacement well pads at POD 1.

In my biased opinion, I think that option 2 is the most reasonable since management wants to retain 100% control. I think that option 2 will have the greatest effect on share price. Currently Stornoway Diamonds is doing a reverse share split in February and Sonde Resources (SOQ-T) formerly Canadian Superior Energy did a reverse share split about 6 months ago and it's share price has not deteriorated since.

Cheers; Scott