ANNUAL REPORT 2011 - Connacher Oil and Gas

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AR 2011 PG 8 AB FORT MCMURRAY SK Great Divide Pod One/Algar EDMONTON Central Alberta Conventional CANADA CALGARY U.S.A. Montana Refining Company GREAT FALLS MT CANADA U.S.A. Oil Sands Assets Conventional Assets Refinery
AR 2011 PG 9 Review of Operations In 2011, Connacher demonstrated: • Average bitumen production of 13,379 bbl/day and average total production of 14,493 boe/day • Increased reliability in oil sands operations with plant steam throughput achieving design conditions • Most profitable refinery operations since the company acquired Montana Refining Company, Inc (“MRC)” in 2006 • A technical leap forward with SAGD+ technology that will benefit Algar and the industry • Continued progress on the Great Divide expansion project design, engineering and stewardship through the application process • A successful property rationalization process with sale of Battrum, Marten Creek, Halfway Creek, Latornell and minor undeveloped land • Innovative marketing and transportation solutions to pipeline restrictions and pricing volatility At the same time Connacher had to deal with: • Declining production and increasing SORs at Pod One as the wells have been producing since 2007 • Minor reservoir issues at Algar • Poor initial production results from the conventional resource play • Capital restraints for the latter half of the year All bITUMEN producers had to deal with: • Volatile pricing for bitumen and diluent • Infrastructure problems, particularly pipeline outages that affected access to market • Rapidly rising costs for equipment and services • Increased competition for key competencies Connacher’s first steam assisted gravity drainage (“SAGD”) project at Great Divide, Pod One, has been producing bitumen since late 2007, with commercial production commencing March 1, 2008. Connacher’s second SAGD project Algar, commenced producing bitumen in August 2010 and commerciality was achieved October 1, 2010. Production from both projects since start-up through December 31, 2011 has totaled approximately 12.6 million barrels of bitumen, of which 4.9 million barrels were produced in 2011. Steam throughput reached design conditions at both plants in 2011. Natural gas prices were essentially flat year-overyear which helped operating costs in the oil sands operations. Although the company met revised production guidance in 2011, lower bitumen production and cash flow necessitated constraining capital spending in the oil sands in the second half of the year. Projects requiring regulatory approval received approval but the capital for those projects was deferred. An application was submitted in May of 2010 that proposes a 24,000 bbl/d expansion of the existing Algar facility – a “brownfield” expansion. While guiding the application through the regulatory process, engineering and design work continued throughout the year on the Great Divide expansion project. Connacher’s SAGD+ trial commenced in July 2011 at Algar and the company is encouraged by initial results. The SAGD+ trial has the potential to improve productivity and reduce SORs by injecting steam mixed with solvent into the reservoir. Two wells were selected to test whether varying solvent volumes added to the steam injection would result in production increases, reduced SORs and the economics recovery of injected solvent at surface treating facilities. The objectives, specifically, were to: • test the incremental bitumen production increase • monitor the timing for solvent recovery • measure how much solvent was retained in the reservoir rather than being produced to surface • evaluate the optimal solvent concentration in the steam
Page 1 and 2: ANNUAL REPORT 2011 WELL POSITIONED
Page 3 and 4: AR 2011 PG 1 02 HIGHLIGHTS 05 LETTE
Page 5 and 6: AR 2011 PG 3 Years ended December 3
Page 7 and 8: AR 2011 PG 5 Volatility in the oil
Page 9: AR 2011 PG 7 “Thanks to our liqui
Page 13 and 14: AR 2011 PG 11 proposals helped to p
Page 15 and 16: AR 2011 PG 13 reservoir description
Page 17 and 18: AR 2011 PG 15 Connacher Oil and Gas
Page 19 and 20: AR 2011 PG 17 the movement of wildl
Page 21 and 22: AR 2011 PG 19 MANAGEMENT’S DISCUS
Page 23 and 24: AR 2011 PG 21 reduced interest rate
Page 25 and 26: AR 2011 PG 23 Connacher’s bitumen
Page 27 and 28: AR 2011 PG 25 OPERATING COSTS (1) T
Page 29 and 30: AR 2011 PG 27 SALES PRODUCT MIX (%)
Page 31 and 32: AR 2011 PG 29 Depletion expense is
Page 33 and 34: AR 2011 PG 31 NEW NOTES We issued U
Page 35 and 36: AR 2011 PG 33 Compensation of key m
Page 37 and 38: AR 2011 PG 35 ACCOUNTING POLICIES A
Page 39 and 40: AR 2011 PG 37 The company classifie
Page 41 and 42: AR 2011 PG 39 Management is respons
Page 43 and 44: AR 2011 PG 41 The production outloo
Page 45 and 46: AR 2011 PG 43 QUARTERLY HIGHLIGHTS
Page 47 and 48: AR 2011 PG 45 Independent Auditor
Page 49 and 50: AR 2011 PG 47 Consolidated Statemen
Page 51 and 52: AR 2011 PG 49 Consolidated Statemen
Page 53 and 54: AR 2011 PG 51 Impairment of assets
Page 55 and 56: AR 2011 PG 53 Goodwill is allocated
Page 57 and 58: AR 2011 PG 55 3.11 Leases Agreement
Page 59 and 60: AR 2011 PG 57 IAS 1 Presentation of
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AR 2011 PG 59 Reconciliation of seg
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AR 2011 PG 61 8.1 Petroleum and nat
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AR 2011 PG 63 10. PROPERTY, Plant a
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AR 2011 PG 65 Accounts receivable a
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AR 2011 PG 67 December 31, 2010 - C
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AR 2011 PG 69 13.3 Refinancing of l
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AR 2011 PG 71 Changes in present va
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AR 2011 PG 73 The provision for inc
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AR 2011 PG 75 The following table s
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AR 2011 PG 77 19. FINANCE Charges F
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AR 2011 PG 79 Compensation of key m
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AR 2011 PG 81 Estimates Hindsight w
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AR 2011 PG 83 Reconciliation of Con
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AR 2011 PG 85 27.3 Asset and Liabil
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AR 2011 PG 87 The following table s
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CORPORATE INFORMATION Board of Dire
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ANNUAL REPORT 2011 - Connacher Oil and Gas

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