Credit Suisse has raised its estimates but kept an Outperform rating and $2 target price on Connacher Oil & Gas (CLL.TO), which has edged away from an existing year low of $1.03.

Fundamental Changes Occurring: "Despite a difficult macro environment in which Connacher's share price performance has been weak, we continue to see positive fundamental change occurring at the company level. We believe this view is reflected in a busy 2nd half for Connacher's business. During H211, we expect an ongoing build out of the company's relatively new resource play focus as well as progress on asset sales and key oil sands initiatives which include: 1. SAGD with solvent test at Algar, 2. regulatory approval for expansion at Great Divide, and; 3. search for a JV partner."

Operational Update & Q2 Preview: Including information provided in a recent operational update, we have adjusted the mix of our total corporate 2011 upstream production forecast for Connacher. While we continue to forecast upstream production at the ~15,750 boe/d level (vs. current annual guidance for 15,500 to 17,900 boe/d), we have lowered our full year bitumen volume assumption while simultaneously raising our outlook for light oil and associated gas. Three more wells at Twining and two at Penhold should continue to drive resource play production higher during H211. For Q2 results on August 11, we expect a significant rise in CFPS to C$0.05 (vs. negative C$0.01 in Q1), underpinned by stronger heavy oil pricing and seasonal strength in refining."

Changes to Estimates: "Based on operational updates, Q2 benchmark pricing, and changes to the Credit Suisse gas price outlook, we have made the following changes to full year estimates for Connacher. Our 2011 EPS/CFPS go from C$(0.05)/0.13 to C$(0.04)/0.15 while 2012 go from C$0.00/0.22 to C$0.04/0.27.Our 2013 EPS estimate goes from C$0.09 to C$0.13. Our C$2.00 target price remains in line with our sum-of-parts valuation and now equates to 8.5x 2012 EBIDAX of C$204 million."