SAGD production from reservoirs with bottom water leads to several challenges. Most commonly, the bottom water is treated as a heat loss zone, leading to high steam-oil-ratios (SOR’s). A traditional approach to these systems is to optimize well placement, trying to balance low SOR’s with loss of recoverable oil below the producer well. However, bottom water can lead to another complication: a further loss of oil resource due to oil invasion into the bottom water. Oil sloughing, as it is called in this thesis, is a novel phenomenon and not much is known about its underlying mechanisms. Previous work suggested that oil sloughing could be harnessed to improve the oil recovery and SOR during SAGD production in reservoirs with bottom water, but the numerical simulation results and field pilot testing appeared to be contradictory. This study aims to prove the existence of oil sloughing, investigate the underlying mechanisms, and evaluate whether it can be mitigated or harnessed to improve the oil recovery and SOR. Due to the novelty of oil sloughing, and its preliminary discovery through numerical simulations, physical visual experiments were conducted to prove its existence and explore its potential mechanisms (a pseudo-2D-model, a mini-2D-model inside a CT scanner, and capillary equilibrium tubes). A numerical simulation study was then conducted to assess and compare the proposed mechanisms. This study is phenomenological in nature; the numbers obtained herein are not scalable but are designed to shed light into the mechanisms that can result in oil sloughing. The results indicate that oil sloughing is a real phenomenon. It is an oil drainage process, i.e., oil pressure must first overcome the water and capillary pressure before it can invade the water zone. In this manner, oil sloughing can be accelerated by conditions such as bottom water cresting and the fact that the fluid displaced down into the bottom water is not just oil but a mixture of oil and condensed steam. Oil sloughing can be harnessed to improve oil recovery and SOR, but the production well must be placed within the minimum distance for oil sloughing to occur. If fluid redistribution happens, sloughing can also potentially block off water cresting and keep production SOR’s low. Bottom water SAGD can be economical if oil sloughing is harnessed properly in conjunction with water cresting to enhance oil recovery during SAGD production in reservoirs with bottom water.