TORONTO CLL.TO 0,01 CA$ -75,00%

CALGARY , Feb. 2, 2015 /CNW/ - Connacher Oil and Gas Limited (CLL – TSX; "Connacher" or the "Company") provides its forecast ("Forecast") for 2015 in the context of its previously announced recapitalization transaction (the "Recapitalization"). This Forecast is based upon the following assumptions:

Commodity Price Assumptions

• Average WTI price of US$49.75 /bbl for 2015
• Based on an exchange of US$1 = C$1.16 , the Company assumes a 2015 average WCS price of $41.30
• AECO 5A gas prices have been assumed to average $2.54 /GJ for 2015

Diluent Costs

• Diluent prices have been assumed to average $60 /bbl for 2015
• The Company is forecasting an estimated Diluent Blend Ratio ("DBR") of 18%, which is consistent with its actual DBR for 2014

Transportation and Marketing

• The Company assumes it will sell approximately 62% of its sales volumes to markets accessed by rail in 2015
• The remaining 38% will be sold to intra- Alberta markets by truck
• Average dilbit transportation costs, including trucking, of $22.00 /bbl in 2015. This reflects rail freight charges, transloading, rail car leasing costs, and trucking to rail and sales destinations within Alberta

Production and Operating Expenses

• Production and operating expenses are currently forecasted to average $18.58 /bbl for 2015
• These expenses are based upon actual historical operating costs and anticipated 2015 production rates

Capital Expenditures

• Connacher's capital spending is estimated at approximately $30 million for 2015, including $15 million for growth capital projects and $15 million for maintenance capital
• Capital expenditures of approximately $4 million with respect to the Q3 2015 planned turnaround have been included in the $15 million of growth capital
• This capital plan contemplates the discontinuance of capital spending in respect of both the mini steam expansion and the implementation of the commercial SAGD+® process at Algar

General and Administrative Costs

• General and administrative costs are forecast to be approximately $33 million in 2015

The following table sets forth the estimated average production, bitumen netback, general and administrative expenses and capital expenditures for each of the quarters in 2015.

The above does not include the effect nor the cost of the contemplated Recapitalization nor any interest expense on current or anticipated future debt, nor any potential gain or loss which might arise from commodity hedging.

The Recapitalization

On January 30, 2015 Connacher announced the Recapitalization aimed at significantly reducing the Company's debt and annual interest expense, and providing additional liquidity to fund ongoing operations. The Recapitalization provides for, among other things:

• Exchange of approximately C$1.0 billion of Connacher's debt for common shares of Connacher, including accrued and unpaid interest (interest will not be paid in cash but dealt with pursuant to the terms of the Plan of Arrangement);
• The issuance by Connacher of US$35 million principal amount of new second lien convertible notes due August 31, 2018 (the "New Convertible Notes");
• The Company will have the option to accrue and compound interest payments due on the New Convertible Notes;
• At the option of Connacher, the funding of a new C$30 million first lien term loan facility ("New Term Loan Facility") to replace Connacher's existing C$30 million revolving credit facility;
• Reduction of annual interest expense by approximately C$80 million ; and
• The Existing First Lien Term Loan will be unaffected.

Additional details regarding the Recapitalization, including the terms of the New Convertible Notes and New Term Loan Facility are contained in the summary term sheets attached to the January 30, 2015 news release.

The Recapitalization is the result of the Company's initiative, announced December 1, 2014 , to devise and implement a strategy to address its liquidity and capital structure. The recent extraordinary shift in commodity prices has severely constrained Connacher's ability to generate cash flow in a context where the Company has a significant debt burden. A reduction in outstanding indebtedness and corresponding interest expense and infusion of new capital is necessary in order to preserve substantial value in the resources, assets and operations of the Company and positions Connacher to regain access to growth capital when commodity markets improve.

About Connacher

Connacher is a Calgary -based in-situ oil sands developer, producer and marketer of bitumen. The Company holds a 100 per cent interest in approximately 450 million barrels of proved and probable bitumen reserves and operates two steam assisted gravity drainage facilities located on the Company's Great Divide oil sands leases near Fort McMurray, Alberta .

Forward-Looking Information

This press release contains forward looking information, including but not limited to, the estimates of future production, dilbit sales, diluent, transportation and handling costs, net realized bitumen sales, royalties, production and operating costs, bitumen netback, general and administrative expenses and capital expenses and statements regarding the anticipated benefits of the Recapitalization.

Forward looking information is based on management's expectations regarding the Company's future financial position, the Company's future growth, results of operations and production, future commodity prices and foreign exchange rates, future capital and other expenditures (including the amount, nature and sources of funding thereof), plans for and results of drilling activity, environmental matters, business prospects and opportunities and future economic conditions. Specific details regarding these expectations are reflected in the assumptions provided above. Forward looking information involves significant known and unknown risks and uncertainties, which could cause actual results to differ materially from those anticipated. These risks include, but are not limited to: that the 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 and resource estimates, the uncertainty of geological interpretations, the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), risk of commodity price and foreign exchange rate fluctuations, risks associated with the impact of general economic conditions, risks and uncertainties associated with maintaining the necessary regulatory approvals and securing the financing to proceed with current and future operations.

Additional risks and uncertainties affecting Connacher and its business and affairs are described in further detail in Connacher's Annual Information Form for the year ended December 31, 2013 . Although Connacher believes that the expectations in such forward looking information are reasonable, there can be no assurance that such expectations shall prove to be correct. The forward looking information included in this press release is expressly qualified in its entirety by this cautionary statement. The forward looking information included herein is made as of the date of this press release and Connacher assumes no obligation to update or revise any forward looking information to reflect new events or circumstances, except as required by law.

Non-GAAP measures

This press release contains terms commonly used in the oil and gas industry, but which do not have a standardized meaning, such as bitumen netback. Bitumen netback is not defined by the financial measures used by Connacher to prepare its financial statements and are referred to herein as non-GAAP measures. Bitumen netback is calculated by deducting the related diluent, transportation and handling, field production and operating expenses, and royalties from dilbit sales. This metric assists in assessing the Company's ability to generate a cash margin on a per unit-of-production basis. These non-GAAP measures should not be considered an alternative to, or more meaningful than, cash provided by operating activities or net earnings (loss) as determined in accordance with GAAP as an indicator of Connacher's performance. Management believes that in addition to net earnings (loss), bitumen netback is a useful financial measurement which assists in demonstrating the Company's ability to make interest payments, fund capital expenditures necessary for future growth or to repay debt. Connacher's determination of bitumen netback may not be comparable to that reported by other companies. Reconciliation of actual results to the Forecast will be included in future financial reporting, together with reconciliations of bitumen netback to net earnings.

SOURCE Connacher Oil and Gas Limited

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