MEG Energy Announces 2013 Capital Budget and Production

MEG Energy Announces 2013 Capital Budget and Production Guidance 
Production set to grow by 20% in 2013, on-track to deliver 80,000 bpd
by early 2015 
Monetary values are Cdn$ unless otherwise noted 
CALGARY, ALBERTA -- (Marketwire) -- 12/10/12 -- MEG Energy Corp.
(TSX:MEG) ("MEG" or "the company") released its 2013 capital budget
and production guidance today, which includes planned capital
investment of approximately $1.9 billion (including $90 million
deferred from previously planned 2012 investments) and a production
target of 32,000 to 35,000 barrels per day (bpd). Goals for 2013
include:  


 
--  Focus on the RISER initiative to deliver high return, near-term
    production growth which, in turn, advances cash flow to support the
    company's significant growth plans; 
--  Production growth of 20% from projected 2012 volumes and a targeted exit
    rate of 37,000 to 43,000 bpd; 
--  Improved efficiency driving non-energy costs to $9-$11 per barrel, a 10%
    reduction from 2012 guidance; 
--  Completion, on budget, of the Christina Lake 2B project in the second
    half of 2013; 
--  Completion of the Stonefell Terminal and advancement of the Access
    Pipeline expansion to support accelerated production growth, mitigate
    differentials and enhance netbacks through improved market access.

 
"I am very excited about the coming year. All the work we have
focused on has positioned us to take giant steps forward in 2013
through 2015," said Bill McCaffrey, President and Chief Executive
Officer. "RISER, Christina Lake Phase 2B, Stonefell and our strategy
to increase market access are on track, becoming a reality in 2013." 
The largest portion of the 2013 capital investment plan
(approximately $500 million), is directed to MEG's RISER initiative,
which focuses on increasing production and throughput capacity from
the company's existing facilities in the near-term. 
"MEG's 2013 capital budget focuses investment on those projects which
are expected to generate the highest returns and lead to near-term
production and cash flow gains. Accelerating cash flows further
improve the company's financial strength to support our significant
growth plans," said McCaffrey.  
As part of the RISER initiative, MEG plans to deploy enhanced
modified steam and gas push (eMSAGP) technology to additional well
pads in 2013. Combined with initial production from the start-up of
Phase 2B, which remains on budget and scheduled to begin steaming in
the second half of the year, MEG is targeting average 2013 production
volumes of 32,000 to 35,000 bpd.  
"Our production target for 2013 is approximately twenty percent above
projected 2012 volumes and we expect further increases that will
double current rates in 2014" said McCaffrey. "At the same time that
we are driving towards higher production, efficiency improvements
with RISER are expected to reduce non-energy operating costs to $9 to
$11 per barrel in 2013 from our 2012 target of $10 to $12 per barrel. 
In addition to planned spending on the RISER initiative, MEG is
planning to invest approximately $700 million in growth capital at
the company's Christina Lake project. Planned investments include
$170 million to complete construction of Phase 2B, $100 million for
drilling and completion of an inventory of stand-by wells to take
advantage of additional freed-up steam with the implementation of
eMSAGP, and $220 million for engineering, long lead-time items and
site preparation for Phase 3A. A final capital cost estimate for
Phase 3A is expected by mid-2013. 
"As we've continued to advance engineering for Christina Lake Phase
3A, we've been identifying synergies with plans for our Phase 3B
processing facilities," said McCaffrey. "With twin plants located
side-by-side, there are significant opportunities to optimize our
investment for shared access, utilities and infrastructure, as well
as leveraging our growing experience with RISER. We see significant
benefits for both phases."  
Christina Lake Phase 3A is currently planned for completion in 2016.
With future development phases at Christina Lake and the initial
phase of MEG's Surmont Project, the company is continuing to target
installed production capacity of 260,000 bpd by the end of 2020.  
As MEG advances its growth strategy, it is also investing in
infrastructure to support increased production via expanded market
access and to further strengthen revenues realized from each barrel
of production. Approximately $360 million is targeted to enhance
MEG's strategic pipeline system and marketing hub in the Edmonton
area. This includes expansion of the jointly-owned Access Pipeline,
which connects Christina Lake operations to the Edmonton area, and
completion of the 900,000 barrel Stonefell Terminal in mid-2013. 
"Proprietary pipeline capacity and storage are central to our 'hub
and spoke' marketing strategy," said McCaffrey. "Together, Access and
Stonefell provide flexibility to acquire and move diluent to our
projects and ship our product blends to the most attractive markets,
helping get more value out of every barrel, while significantly
mitigating differentials and pipeline restrictions." 
The Edmonton hub provides connections to current and developing
markets through pipelines and other transportation options. MEG has
already secured long-term capacity commitments on pipelines to the
U.S. Gulf Coast and options on proposed pipeline capacity to Canada's
West Coast. MEG has also secured initial rail and barge
transportation capacity to reach higher value markets, with
commitments and plans to further expand alternative transportation in
2013.  
To support existing operations, MEG is planning $80 million in
sustaining and maintenance capital spending in 2013. Funding is
planned for new wells to replace expected production declines in
Phases 1 and 2 well pairs, as well as capital for routine
maintenance.  


 
2013 Capital Budget                                                         
($ millions unless otherwise noted)                                         
                                                                            
                                                                 2013 Budget
----------------------------------------------------------------------------
                                                                            
Growth                                                                      
RISER enhancement initiative                                             480
Christina Lake Phase 2B                                                  170
Christina Lake Phase 3A                                                  220
Well inventory                                                           100
Core hole drilling and seismic                                           100
Commissioning & start-up and other growth                                140
Regulatory                                                                10
                                                                            
Infrastructure                                                              
Access Pipeline                                                          260
Stonefell Terminal                                                       100
Field infrastructure                                                      80
                                                                            
Sustaining and Maintenance                                                80
                                                         
                   
Research & Development                                                    60
                                                                            
Other                                                                     50
                                                                            
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2013 capital approved                                                  1,850
Carryover from 2012                                                       90
                                                                            
----------------------------------------------------------------------------
                                                                            
Total 2013 capital budget                                              1,940
                                                                            
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2013 Operations Guidance                                                    
                                                                            
                                     2013 Budget    2012 Guidance  % Change 
----------------------------------------------------------------------------
Production (bpd)                 32,000 - 35,000  26,000 - 28,000       +24%
Non-energy operating costs                                                  
 (/bbl)                                 $9 - $11        $10 - $12       -10%

 
The approval of MEG's 2013 capital budget is subject to the
successful completion of MEG's current financing activities. 
Forward-Looking Information 
This news release may contain forward-looking information including
but not limited to: expectations of future production, SORs,
operating costs and capital investments; the timing for completion of
the Stonefell terminal; the expansion of the Access pipeline; the
impact of MEG's hub-and-spoke strategy on netbacks and on its
exposure to differentials and pipeline restrictions; the anticipated
capital requirements, development plans, timing for completion,
production declines, accelerated production growth, cashflows,
production capacities and performance of the future phases and
expansions of the Christina Lake project (including the RISER
initiative) and the Surmont project; and the potential financings for
MEG's operations and capital investments. All such forward-looking
information is based on management's expectations and assumptions
regarding future growth, results of operations, production, 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. By its nature, such 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: risks and delays in the
development of or in the production associated with MEG's projects;
the securing of adequate supplies and access to markets and
transportation infrastructure; the uncertainty of estimates and
projections relating to production, costs and revenues; the
availability of take away capacity on the electric transmission grid;
health, safety and environmental risks; risks of legislative and
regulatory changes to, amongst other things, tax, land use, royalty
and environmental laws; changes in commodity prices and foreign
exchange rates; and risks and uncertainties associated with securing
and maintaining the necessary regulatory approvals and financing to
proceed with the development of MEG's projects and facilities.
Although MEG believes that the assumptions supporting such
forward-looking information are reasonable, there can be no assurance
that such assumptions will be correct. Accordingly, readers are
cautioned that the actual results achieved may vary from the
forward-looking information provided herein and that the variations
may be material. Readers are also cautioned that the foregoing list
of assumptions, risks and factors is not exhaustive. For more
information regarding forward-looking information see "Risk Factors"
and "Regulatory Matters" within MEG's annual information form dated
March 28, 2012 (the "AIF") along with MEG's other public disclosure
documents. A copy of the AIF and of MEG's other public disclosure
documents is available through the SEDAR website or by contacting
MEG's investor relations department. Guidance regarding capital
expenditures may constitute a "financial outlook" as contemplated by
National Instrument 51-102 of the Canadian Securities Administrators
entitled Continuous Disclosure Obligations. The purpose of such
guidance is to forecast the anticipated capital expenditures by MEG
in 2013 and such information may not be appropriate for other
purposes. 
This press release shall not constitute an offer to sell, or the
solicitation of an offer to buy, any securities in any jurisdiction.
The common shares being offered have not been and will not be
registered under the U.S. Securities Act of 1933 and state securities
laws. 
MEG Energy Corp. is focused on sustainable in situ oil sands
development and production in the southern Athabasca region of
Alberta, Canada. MEG is actively developing enhanced oil recovery
projects that utilize SAGD extraction methods. MEG's common shares
are listed on the Toronto Stock Exchange under the symbol "MEG."
Contacts:
Investors
MEG Energy Corp.
Helen Kelly
Director, Investor Relations
403 767 6206
helen.kelly@megenergy.com 
Media
MEG Energy Corp.
Brad Bellows
Director, External Communications
403 212 8705
brad.bellows@megenergy.com