Connacher updates first quarter 2006 activityConnacher updates first quarter 2006 activity
CALGARY, April 17 /CNW/ - Connacher Oil and Gas Limited (CLL - TSX) is
pleased to provide an operational update on its first quarter activities,
including the Luke Energy Ltd. ("Luke") acquisition, the Montana Refining
Company ("MRC") acquisition and activity and developments at its Great Divide
oil sands project in northeast Alberta. The company is currently producing
3,575 boe/d, which consists of 71% natural gas production and 29% light and
medium crude oil production.
Great Divide
At Great Divide Connacher drilled, logged and cored 20 wells in the first
quarter 2006. Ten additional locations were prepared with surface casing set;
however, weather and rig availability precluded drilling these additional
locations this winter. The total number of core holes completed was
considerably less than Connacher intended to drill, but it was a difficult and
mild winter drilling season with a late start and an early finish for all
operators in the oil sands area.
Approximately 51 square km of 3D seismic covering Pods 2, 4, 5 and
extensions to Pod 1 were completed or were in the process of completion when
work was suspended due to the recent arrival of caribou in the area. Seismic
over regions proximate to Pod 1 will be completed after the caribou calving
season is completed. This seismic will be critical for Pod 1 extension
interpretation, although core holes drilled this winter already suggest that
these extensions to Pod 1 do exist.
The process of interpretation and integration of 3D seismic and geology,
including resource assessment, will continue throughout second quarter.
Factors that will influence the time required to interpret each pod include
reservoir heterogeneity or complexity, channel stratigraphy, lithology and
architecture relative to original models and the desire to have tight
integration of seismic data with geological data specific to each pod. These
interpretations are critical to determine whether there will be sufficient
quality, size and delineation to embark on SAGD development over and above
Pod 1. Decisions in this regard are now more likely to occur after mid-year
2006 once the required technical assessments are completed.
Preliminary results at this time indicate that all but one core in Pod 4
have more than 15m of oilsands pay, and results at Pod 2 were considered very
encouraging, based on reservoir quality and aerial extent. Pod Four is
situated in the southeast corner of Connacher's main lease block and Pod 2 is
located at the northeast corner. A new pod, Pod 5, located centrally on
Connacher's lands, may be smaller overall than what would be required for
independent development at this time. However, some form of satellite
development might be possible given its proximity to Pod 1. The company is
sufficiently encouraged with the results at all five pods which have been
identified to date to be planning a substantial core hole and seismic program
for the winter of 2007.
Connacher has responded to all final questions from the regulatory bodies
which are responsible for reviewing the application to develop the
Great Divide SAGD project at Pod 1. Connacher recently received a letter of
concern from a First Nations group relative to its application; meetings have
been held and the company is negotiating with this group to resolve the
expressed concerns. Additionally, the company is developing a business
solution with one of the owners of natural gas rights in the Great Divide
area. Each of these sets of negotiations could be completed within a few weeks
and will require final discussion with the Alberta Energy and Utility Board
(EUB). These negotiations are holding up final approval of Great Divide Pod 1
at this time.
Regardless of these short-term delays, detailed engineering and design
has progressed to the point where Connacher has ordered 90% of the equipment
for the SAGD facility. Subject to the timing of regulatory approval, Connacher
still anticipates plant startup to occur in early 2007.
Conventional Activity
At Marten Creek, Alberta, a Luke winter access property, 15 wells were
drilled and 11 wells were cased in first quarter 2006. Ten wells were tested
and eight were tied in to existing infrastructure and are on production. The
other wells will require new infrastructure and will be 2007 projects. The new
producing wells will be optimized over the course of the second quarter 2006.
As a result of the success of the Marten Creek drilling, several new areas in
the region will be pursued for additional exploitation and development in
2007.
Connacher is continuing to integrate the former Luke assets and
experienced personnel into its operating strategy. The company is planning to
drill new wells on a former Luke property at Three Hills, Alberta which will
be followed by a 3D seismic-based drilling program in S.W. Saskatchewan. A
total of eight locations are planned and subject to rig availability, the
program is targeted for completion by the end of the second quarter 2006.
Montana Refining Company, Inc.
As previously announced on March 31, 2006, Montana Refining
Company, Inc., Connacher's wholly-owned subsidiary, closed the acquisition of
refining and related assets in Great Falls, Montana. The refinery processes
8,300 barrels of crude oil on a daily basis. This acquisition is considered
integral to Connacher's downstream oil sands strategy. As well, it is
anticipated the refinery will function as a profitable business unit in its
own right. The refinery is currently on a scheduled turnaround, which is on
track to be completed in early May 2006, when all units will be fully
operational. The integration of this new business unit and the turnaround has
proceeded very favorably, largely as a result of the strong involvement of the
competent and enthusiastic Montana-based refinery personnel who remained with
the operation.
Integration and expansion of the systems and personnel will continue
throughout second quarter. Based on preliminary indications, demand for
products and the prices anticipated to be received for gasolines, diesels and
asphalts will be very strong during the upcoming summer months in 2006. With
the turnaround completed by then, MRC should be operating in this peak season
with a "well tuned" refinery capable of running at or near full capacity.
Connacher Oil and Gas Limited is a public Canadian crude oil and natural
gas company with 191,490,659 common shares currently issued and outstanding.
Its principal asset is a 100 percent interest in 110 sections (70,400 acres)
of leases at its Great Divide oil sands project in northeastern Alberta.
Connacher also holds conventional producing properties and reserves in the
Provinces of Alberta and Saskatchewan, an 8,300 bbl/d refinery in Montana,
U.S.A. and owns a 31 percent equity stake in Petrolifera Petroleum Limited
(PDP - TSX), which recently announced a number of significant crude oil
discoveries on its Puesto Morales/Rinconada concession located in the
Neuquen Basin, Argentina.
Connacher's annual and special meeting of shareholders is scheduled to be
held at 3 pm on Thursday, May 11, 2006 in the Eau Claire Room of the
Westin Hotel, 320 - 4th Avenue SW, Calgary. The company anticipates releasing
its first quarter results at that also.
This press release contains forward-looking statements, including
statements related to the anticipated financial performance of former Luke
properties and of MRC. These statements are based on current expectations that
involve a number of risks and uncertainties, which could cause actual results
to differ from those anticipated. These risks include, but are not limited to,
risks associated with the oil and gas industry (e.g. operational risks in
development, exploration and production; delays or changes in plans with
respect to exploration or development projects or capital expenditures; the
uncertainty of reserve estimates; the uncertainty of estimates and projections
in relation to production, costs and expenses and health, safety and
environmental risks), the risk of commodity price and foreign exchange rate
fluctuations, the risks and uncertainties associated with securing the
necessary regulatory approvals and financing to proceed with and complete the
Great Divide project.
Due to the risks, uncertainties and assumptions inherent in forward-
looking statements, prospective investors in the company's securities should
not place undue reliance on these forward-looking statements. For additional
information relating to the risks and uncertainties facing Connacher, refer to
Connacher's 2005 Annual Report and Annual information Form which are available
on SEDAR at www.sedar.com. A barrel of oil equivalent (boe), derived by
converting gas to oil in the ratio of six thousand cubic feet of gas to oil,
and may be misleading, particularly if used in isolation. A boe conversion is
based on an energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the wellhead.
For further information: contact: Richard A. Gusella, President and
Chief Executive Officer, Connacher Oil and Gas Limited, Phone: (403) 538-6201,
Fax: (403) 538-6225, inquiries@connacheroil.com, www.connacheroil.com