In 2010, we embarked on a new land acquisition and drilling program in the general Three Hills/Twining area of central Alberta, in close proximity to existing core area conventional crude oil operations. This followed an extensive and detailed "resource project" approach to this endeavour prior to initiation. Our goal was to secure a significant inventory of potential locations which, if early drilling was successful, would give us a project in scope and size similar to our oil sand projects, but with a focus on high netback light gravity crude oil which could be exploited aggressively, using modern horizontal drilling technology, with which we have extensive experience and newly developed multi-frac technology.

We are pleased to report we have acquired over 30 sections of petroleum and natural gas ("P&NG") rights in the area; have drilled our first three wells, have one on production, one about to go on production and one well awaiting completion of a rapid matrix frac, which we redesigned to more effectively impact the Pekisko Formation, our primary objective. Once we have reliable data, we will provide more details on the actual well results. Our landholdings could permit the drilling of 100 or more wells on this resource play, with the obvious potential of a meaningful impact on our production, revenue and cash flow. This could occur in a much more compressed time frame than is characteristic of our oil sands projects, which often require several years to reach fruition. Needless to say, we are excited about this initiative, which we see as complementary to our longer term commitment to the development of our oil sands assets, by providing Connacher with the potential of much increased internally generated cash flow in a short time frame to assist in financing the Company’s overall growth, while simultaneously allowing us to capitalize on our in-house expertise in horizontal drilling and project management.