Connacher Oil and Gas Limited

Connacher Oil and Gas Limited

October 29, 2007 16:35 ET

Connacher Announces $40 Million Flow-Through Share Offering; First Step of its Integrated Oil Sands Development Financing Plan

CALGARY, ALBERTA--(Marketwire - Oct. 29, 2007) -


Connacher Oil and Gas Limited (TSX:CLL) announces today that it has entered into an agreement with a syndicate of underwriters led by RBC Capital Markets under which Connacher will issue 8,000,000 flow-through common shares ("Flow-Through Shares") on a "bought deal" basis for gross proceeds of $40 million ($5.00 per Flow-Through Share). Connacher has granted the underwriters an over-allotment option to purchase up to an additional 1,200,000 Flow-Through Shares on the same terms and conditions, exercisable in whole or in part up to 30 days following closing of the offering. The offering is scheduled to close on or about November 16, 2007.

Connacher will use the gross proceeds from the sale of the Flow-Through Shares to pay exploration expenses on the Corporation's properties which qualify as Canadian Exploration Expenses (as such term is defined in the Income Tax Act (Canada)). It is anticipated that the net proceeds will primarily be used to further delineate and define Connacher's oil sands properties through the drilling of additional core holes and for conducting a three-dimensional (3-D) seismic program over Connacher's oil sands properties.

A preliminary short-form prospectus will be filed with securities regulatory authorities in all provinces of Canada except Quebec. The offering is subject to the approval of such securities regulatory authorities.

This Flow-Through Share offering represents Connacher's first step in its active pursuit of financing arrangements to secure the additional capital resources the Corporation estimates it will require to fund the ongoing development of its oil sands operations, including the construction of the Algar Project (the Corporation's second 10,000 bbl/d oil sands project), the identification of other oil sands accumulations, to repay existing long term and bank indebtedness and for general corporate purposes, including establishment of a one year debt service reserve account related to possible new long term debt.

At present, Connacher is also investigating alternative new debt financing arrangements, which may include a new first lien secured revolving five year term credit facility and the issuance of long-term second lien senior secured notes. Such new debt arrangements would be structured to further enhance overall corporate liquidity and would better align Connacher's capitalization with the long life characteristics of its refining assets and its crude oil, natural gas and bitumen reserve and resource base and the associated estimated future net revenue of its reserves and resources, as determined by Connacher's qualified independent reserves evaluator. It is anticipated that the second lien senior secured notes would require only payments of interest at a fixed rate until maturity. This would allow the Corporation to dedicate its available funds from operations to future capital expenditure programs without having to amortize or retire long term debt. As Connacher's bitumen production and sales from Great Divide increase, Connacher anticipates being increasingly self sufficient in financing its prospective capital expenditure programs. However, to allow Connacher to retain an appropriately structured capitalization and also to pursue its growth objectives, these debt arrangements may in future be supplemented from time to time with issuances of common equity, if, as and when required, while simultaneously seeking to limit share dilution.

There can be no assurance that Connacher will be able to complete its debt financing arrangements on the general terms and conditions described above, or on terms and conditions acceptable to Connacher, or at all.

This press release is not an offer to sell securities or the solicitation of an offer to buy securities in any jurisdiction. Securities may not be offered or sold in the United States absent registration or an applicable exemption from registration. Any public offering of securities to be made in the United States would be made by means of a prospectus that would be obtainable from Connacher and that would contain detailed information about Connacher and management, as well as financial statements.

Connacher Oil and Gas Limited is a Calgary-based Canadian company primarily engaged in the exploration for, and development, production, refining and marketing of, bitumen, crude oil, natural gas and refined petroleum products. The company's principal assets are its significant bitumen reserves and resources and its 100 percent working interest in approximately 95,000 acres of oil sands leases in the Divide and Halfway Creek regions near Fort McMurray, Alberta. It also owns conventional production and reserves at Marten Creek and Three Hills, Alberta and at Battrum, Saskatchewan. Connacher owns and operates a 9,500 barrel per day refinery in Great Falls, Montana and maintains a valuable 26 percent equity stake in Petrolifera Petroleum Limited (PDP - TSX), a public company active in Argentina, Colombia and Peru in South America.

Forward-Looking Statements: This news release contains certain "forward-looking information" within the meaning of applicable securities law including statements regarding the Corporation's exploration and development plans, the proposed restructuring of the Corporation's current debt facilities and, the ability of the Corporation to raise additional debt and equity financing. Forward-looking information is frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate", "may", "will", "would", "potential", "proposed" and other similar words, or statements that certain events or conditions "may" or "will" occur. These statements are only predictions. Forward-looking information is based on the opinions and estimates of management at the date the information is provided, and is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information. These factors include the inherent risks involved in the exploration and development of oil sands properties, difficulties or delays in start-up operations, the uncertainties involved in interpreting drilling results and other geological data, fluctuating oil prices, the possibility of unanticipated costs and expenses, uncertainties relating to the availability and costs of financing needed in the future and other factors including unforeseen delays. As an oil sands enterprise in the development stage, Connacher faces risks including those associated with exploration, development, start-up, approvals and the ability to access sufficient capital from external sources. For a description of the risks and uncertainties facing Connacher and its business and affairs, readers should refer to Connacher's Annual Information Form for the year ended December 31, 2006. Connacher undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change, unless required by law. The reader is cautioned not to place undue reliance on forward-looking statements.

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