MARCH 20, 2008

Q4 Below Expectations but Better Times Ahead

Connacher released year end results.

CFPS of $0.03 was below our estimate of $0.04 due to (1) lower than expected

conventional production, (2) higher than expected natural gas operating costs and

(3) lower than expected refining margins, likely due to a higher portion of asphalt

sales

Bitumen production at Great Divide was recently near 6,000 bbl/d, with

individual well productivity approaching 1,000 bbl/d on given days. Production is

currently constrained to deal with variable emulsion streams (bitumen/water

combinations that come from wells being at different stages of conversion).

Given continued progress that is ahead of expectations, we have moved our

plateau production date forward to Q4/08 from Q1/09.

The recent startup of natural gas production from 2007 and 2008 discoveries at

Randall has brought conventional production above 3,600 boe/d, which is 61%

higher than Q4/07 production of 2,233 boe/d. Other new discoveries are expected

to be brought on production shortly.

The company indicated that it "is very pleased with the density, frequency and

apparent quality of the bitumen accumulations it has encountered". Results will

be incorporated in the mid-year reserve report and could result in an application

being filed for a third pod.

Since completing a turnaround in Q2/06 after being acquired, the Great Falls

refinery has averaged 100% utilization over the past seven quarters. This

impressive reliability and record margins resulted in the $46MM purchase price

being recovered with after-tax cash flow in 18 months. The company indicated

that it is considering an expansion to 35,000 bbl/d from current capacity of 9,500

bbl/d at a cost greater than US$400MM. This is potentially quite positive as we

are assuming an expansion to 25,000 bbl/d at a nominal cost of $428MM.