ANNUAL REPORT 2011 - Connacher Oil and Gas

AR 2011
PG 5
Volatility in the oil and gas industry and new technologies
and transportation initiatives made for an interesting year at
Connacher. The first half of 2011 saw the continued ramp-up
of Algar (which commenced production in August 2010) and a
focus on increasing reliability at both Pod One and Algar.
LETTER TO SHAREHOLDERS
Dislocated pricing in the bitumen market
due to pipeline outages and apportionment
across North America resulted in Connacher
pioneering the sale of diluted bitumen
(dilbit) by rail to the Gulf and West coasts.
Operational reliability continued to improve
during the year as evidenced by reduced
chemical usage, improved water treating
and recycling rates, upgraded electrical
services, improved downhole pump run life
and optimized evaporator performance.
Work continued during the year on the
Great Divide expansion project, for which
Connacher expects to obtain regulatory
approval in the first half of 2012. The
SAGD+ trial (where solvent is mixed with
steam and injected into the reservoir) started
in July and demonstrated very encouraging
results as a way to improve well productivity
and reduce steam:oil ratios (“SORs”).
debt. Asset sales continued throughout
the year and added to cash balances. Joint
venture processes were initiated in the oil
sands and light oil resource plays but were
subsequently suspended.
The refinery in Great Falls, Montana had
strong results in 2011 as prices for refined
products in its market area remained healthy
throughout the year.
In May 2011, the Company refinanced
its long-term debt at lower coupon rates,
extended maturities to 2018 and 2019
and reduced its exposure to U.S. dollar
denominated debt by replacing a portion of
its debt with Canadian dollar denominated