Connacher Oil and Gas Limited unwinds cross currency swap asset for cash proceeds of $89.1 million to further enhance liquidity

Connacher Oil and Gas Limited (CLL - TSX) announces that it has completed the monetization of its US$300 million cross currency swap asset on its US$600 million senior notes for cash proceeds of $89.1 million. The completion of the transaction and the resultant increase in the company's cash balances were accomplished without any equity dilution or without incurring any additional indebtedness. The monetization of the cross currency swap asset was completed in view of weak and uncertain commodity prices to further strengthen the company's ability to fund its recently announced Q4 2008 and 2009 capital plans. The combination of Connacher's unrestricted cash and bank credit capacity of $389 million as at September 30, 2008, in addition to the $89.1 million of cash proceeds received from the unwinding of the cross currency swap, is anticipated to be sufficient to fund all of the company's Q4 2008 revised capital spending program of $95 million, its 2009 budget of $351 million and its anticipated 2009 interest payments related to its convertible debentures, senior notes and anticipated draws on its revolving term credit facility.

It is noted that Q4 2008 capital spending excludes $15 million of capitalized interest, which will be paid at year end from the company's restricted funds, or escrow account, which separately contains $34 million as at September 30, 2008. Also, the company anticipates $22 million of expenditures related to its cogeneration plant at Algar will be project financed, thus reducing the cash requirements for its previously announced 2009 capital budget from $373 million to $351 million.

The company's net operating income (defined as revenue less operating expenses less royalties) anticipated to be generated in Q4 2008 and calendar 2009 is also anticipated to be more than sufficient to fund any remaining cash costs, which include general and administrative expenses, Algar contingency (if any) and working capital requirements. Net operating income does not have a standardized meaning prescribed by Canadian generally accepted accounting principles ("GAAP") and therefore may not be comparable to similar measures used by other companies. The most comparable measure calculated in accordance with GAPP would be net earnings and when actual amounts are presented, reconciliation with net earnings is provided by the company.

The company also reports that to further enhance the certainty of its calendar 2009 cash revenue stream, it recently hedged a portion of its US dollar based oil sands revenues. The company entered into a costless collar on a notional amount of US$10 million of monthly revenues for next year, which guarantees a floor price to be received of CAD$1.1925 for every US$1.00 of revenue, with a cap price to be received of CAD$1.30 for every US$1.00 of revenue. As Connacher's revenue is very sensitive to the Canadian dollar / US dollar relationship, this hedge provides Connacher with a more predictable revenue stream within a reasonable band during extremely volatile times such as are presently being experienced.

Connacher Oil and Gas Limited is a Calgary-based crude oil, bitumen and natural gas company which employs an integrated strategy in its oil sands operations. Its principal asset is a 100 percent ownership in a significant bitumen reserve and resource base and in additional undeveloped acreage in the Great Divide and Halfway Creek regions of Alberta, where it also operates the 10,000 bbl/d Pod One project. Connacher owns a 9,500 bbl/d heavy oil refinery in Great Falls, Montana and also owns conventional hydrocarbon reserves and produces crude oil and natural gas in Alberta and Saskatchewan. The company maintains a 24 percent equity interest in and is the largest shareholder of Petrolifera Petroleum Limited, a public company listed for trading on the Toronto Stock Exchange and active in the oil business in Argentina, Peru and Colombia.

Forward-Looking Information:

This press release contains "forward-looking information" including: planned Q4 2008 and 2009 capital expenditures (including construction of the Algar project), sources of funding capital expenditures and forecast liquidity. Forward-looking information is frequently characterized by words such as "plan", expect", "project", "intend", "believe", "anticipate", estimate", "may", "will", "could", "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 statements are made, and are 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 statements. These factors include the inherent risks involved in the exploration and development of oil sands properties, difficulties or delays during construction and in start-up operations, the uncertainties involved in interpreting drilling results and other geological data, fluctuating oil and prices, fluctuating differentials, the possibility of unanticipated costs and expenses, uncertainties relating to the availability and costs of financing needed in the future, general economic conditions and other factors including unforeseen delays. As an oil sands enterprise in the development stage, Connacher faces risks including those associated with exploration, development, construction, start-up, approvals and the continuing ability to access sufficient capital from external sources if required. In addition, the current financial crisis has resulted in severe economic uncertainty and resulting illiquidity in capital markets which increases the risk that actual results will vary from forward looking expectations and these variations may be material. 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, 2007, which is available at www.sedar.com. Connacher undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change, unless required by law. Due to the risks and uncertainties inherent in forward-looking information, the reader is cautioned not to place undue reliance on this forward-looking information.

SOURCE: Connacher Oil and Gas Limited

Richard A. Gusella, President and Chief Executive Officer; or Grant Ukrainetz, Vice President, Corporate Development; Connacher Oil and Gas Limited, Phone: (403) 538-6201, Fax: (403) 538-6225, This email address is being protected from spambots. You need JavaScript enabled to view it., www.connacheroil.com