MEG Energy reports strong second quarter results

Top tier operational results and execution of growth projects set stage for 
strong second half 
CALGARY, July 30, 2013 /CNW/ - MEG Energy Corp. today reported second quarter 
2013 operational and financial results. Highlights include: 


    --  Phase 2B water treatment and steam generation facilities are
        mechanically complete, with commissioning underway and steaming
        set to begin later in the third quarter, with first oil planned
        in the fourth quarter;
    --  Near-record quarterly production volumes of 32,144 barrels of
        bitumen
        per day (bpd);
    --  A highly efficient steam-oil ratio of 2.3, reflecting continued
        deployment of MEG's eMSAGP technology;
    --  Net operating costs of $8.85 per barrel;
    --  Strong cash operating netbacks at $41.93 per barrel, primarily
        due to narrowing light-heavy crude oil differentials;
    --  Revolving credit facility increased from US$1 billion to US$2
        billion (which remains undrawn) and maturity extended to 2018.

MEG's production during the second quarter of 2013 increased by 6% to an 
average 32,144 bpd, from a second quarter 2012 production average of 30,429 
bpd. For the first six months of 2013, production increased by 10% to 32,337 
bpd from 29,411 bpd in the first half of 2012.

"We're very pleased with our performance this quarter, especially considering 
the impact of maintenance and tie-in work that took place in May," said Bill 
McCaffrey, President and Chief Executive Officer. "As we continue to roll out 
the RISER initiative, and with plans to start up Phase 2B later this year, 
we're set for a very strong second half." MEG is targeting 2013 exit rates of 
37,000 to 43,000 bpd and annual average production volumes of 32,000 to 35,000 
bpd.

Net operating costs, which include natural gas energy costs and revenues from 
electricity sales, were $8.85 per barrel in the second quarter of 2013 
compared to $8.55 in the second quarter of 2012. Second quarter 2013 
non-energy operating costs averaged $10.00 per barrel and remain within 2013 
guidance of $9 to $11 per barrel.

High production volumes, low operating costs and stronger price realizations 
in the second quarter of 2013 generated cash flow of $79.2 million ($0.35 per 
share, diluted), compared to cash flow of $60.0 million ($0.30 per share, 
diluted) in the second quarter of 2012.

Operating earnings, which are adjusted for items that are not indicative of 
operating performance, were $13.6 million ($0.06 per share, diluted) in the 
second quarter of 2013 compared to $11.1 million ($0.06 per share, diluted) in 
the same period of 2012, reflecting the same factors that impacted cash flow 
from operations.

MEG recorded a $62.3 million net loss ($0.28 per share, diluted) in the second 
quarter of 2013, compared to a net loss of $29.5 million ($0.15 per share, 
diluted) in the second quarter of 2012. The net loss in the second quarter of 
2013 is primarily due to an unrealized foreign exchange loss of $82.4 million 
(before tax) on the translation of the company's U.S. dollar denominated debt, 
net of U.S. dollar cash and cash equivalents, as the Canadian dollar lost 
value relative to the U.S. dollar.

Capital and Growth Strategy

MEG's management believes the company has the financial resources in place, 
including working capital of $731 million and an undrawn US$2.0 billion 
revolving credit facility, to execute its plans to increase production to 
80,000 bpd by early 2015.

"Increased production is expected to drive a substantial increase in cash 
flow, which enables a larger portion of future capital spending to be 
internally funded," said McCaffrey.

As part of RISER, in the second quarter MEG tied-in 13 new infill wells in the 
Phase 2 area that are expected to ramp up through the second half of 2013 and 
into early 2014 with the continued deployment of eMSAGP technology.

Phase 2B water treatment and steam generating facilities are now mechanically 
complete and in the commissioning process, with start-up of steaming planned 
for late in the third quarter. Completion of oil treating facilities and first 
oil are expected in the fourth quarter. Phase 2B has a design capacity of 
35,000 bpd at a conservative steam-oil ratio of 2.8. However, with many of the 
elements of the RISER initiative already built into the plant's design, MEG 
anticipates that we will be able to increase throughput beyond the base design 
level.

Marketing Strategy

In addition to growing its production base, MEG continues to pursue strategies 
to expand the company's reach to higher-value crude oil markets. MEG now has 
all 18 of its leased barges available for use, as needed, to move products 
along the U.S. Inland Waterway system to the Gulf Coast. MEG also expects 
connections between its Stonefell Terminal and an Edmonton-area rail loading 
facility, which is scheduled for operation later this year, to provide further 
transportation options.

"While we've seen differentials between Western Canadian heavies and WTI 
narrow significantly this quarter, we are taking a longer-term view with the 
goal of significantly mitigating that differential volatility from our future 
revenues," said McCaffrey. "Having a full suite of market options will help 
move us toward world pricing and support greater price stability, regardless 
of short-term market swings.

Operational and Financial Highlights
                                                          
                    Three months ended June 30 Six months ended June 30
                         2013             2012      2013           2012

Bitumen production     32,144           30,429    32,337         29,411
- bpd

Steam to oil ratio        2.3              2.4       2.4            2.4
(SOR)
                                                                       

West Texas              94.22            93.49     94.30          98.21
Intermediate (WTI)
US$/bbl

Differential -          27.1%            31.6%     34.7%          31.4%
Blend vs WTI - %
                                                                       

Bitumen realization     53.98            45.59     42.04          47.81
- $/bbl
                                                                       

Net operating costs      8.85             8.55      9.65           8.25
((1) )- $/bbl
                                                                       

Cash operating          41.93            34.17     29.94          36.62
netback((2)) -
$/bbl
                                                                       

Capital cash          653,827          339,077 1,322,759        703,939
investment - $000
                                                                       

Net income (loss) -  (62,312)         (29,534) (133,606)         23,835
$000

  Per share,           (0.28)           (0.15)    (0.60)           0.12
  diluted

Operating earnings     13,612           11,134  (23,100)         34,663
(loss) - $000((3))

  Per share,             0.06             0.06    (0.10)           0.18
  diluted((3))

Cash flow from         79,184           59,975    86,255        131,966
operations - $000(
(3))

  Per share,             0.35             0.30      0.39           0.67
  diluted((3))
                                                                       

Cash, cash          1,203,457        1,111,150 1,203,457      1,111,150
equivalents and
short-term
investments - $000

Long-term debt -    2,923,382        1,751,522 2,923,382      1,751,522
$000
                                                                       

(1)Net operating costs include energy and non-energy operating costs, 
reduced by power sales for the period.

(2)Cash operating netbacks are calculated by deducting the related 
diluent, transportation, field operating costs and royalties from production 
and power revenues, on a per barrel basis.

(3) Please refer to Non-IFRS Financial Measures below

A full version of MEG's Second Quarter 2013 Report to Shareholders, including 
unaudited financial statements, is available at www.megenergy.com/investors 
and at www.sedar.com.

A conference call will be held to review MEG's second quarter results at 7:30 
a.m. Mountain Time (9:30 a.m. Eastern Time) on Tuesday, July 30, 2013. The 
U.S./Canada toll-free conference call number is 1 888-231-8191. The 
international/local conference call number is 647-427-7450.

Forward-Looking Information

This document may contain forward-looking information including but not 
limited to: expectations of future production, revenues, cash flow, pricing 
differentials and capital investments; estimates of reserves and resources; 
the anticipated capital requirements, development plans, timing for 
completion, commissioning and start-up, as well as capacities and performance 
of Phase 2B and the RISER initiative, the Stonefell Terminal, third party 
barging and rail facilities and the future phases and expansions of the 
Christina Lake project; and the anticipated sources and sufficiency of funding 
for MEG's future growth. 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 associated with the oil and gas 
industry (e.g. operational risks and delays in the development, exploration or 
production associated with MEG's projects; the securing of adequate supplies 
and access to markets and transportation infrastructure; the availability of 
capacity on the electrical transmission grid; the uncertainty of reserve and 
resource estimates; the uncertainty of estimates and projections relating to 
production, costs and revenues; health, safety and environmental risks; risks 
of legislative and regulatory changes to, amongst other things, tax, land use, 
royalty and environmental laws), assumptions regarding and the volatility of 
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 continued expansion of the Christina Lake 
project and the development of the Corporation's other projects and 
facilities. Although MEG believes that the assumptions used in 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. The forward-looking information included in this document is 
expressly qualified in its entirety by the foregoing cautionary statements. 
Unless otherwise stated, the forward-looking information included in this 
document is made as of the date of this document and the Corporation assumes 
no obligation to update or revise any forward-looking information to reflect 
new events or circumstances, except as required by law. For more information 
regarding forward-looking information see "Notice Regarding Forward Looking 
Information", "Risk Factors" and "Regulatory Matters" within MEG's Annual 
Information Form dated February 27, 2013 (the "AIF") along with MEG's other 
public disclosure documents. Copies of the AIF and MEG's other public 
disclosure documents are available through the SEDAR website (www.sedar.com) 
or by contacting MEG's investor relations department.

Non-IFRS Financial Measures

This document includes references to financial measures commonly used in the 
crude oil and natural gas industry, such as operating earnings, cash flow from 
operations and cash operating netback.These financial measures are not 
defined by IFRS as issued by the International Accounting Standards Board and 
therefore are referred to as non-IFRS measures. The non-IFRS measures used by 
MEG may not be comparable to similar measures presented by other companies. 
MEG uses these non-IFRS measures to help evaluate its performance. Management 
considers operating earnings and cash operating netback important measures as 
they indicate profitability relative to current commodity prices. Management 
uses cash flow from operations to measure MEG's ability to generate funds to 
finance capital expenditures and repay debt. These non-IFRS measures should 
not be considered as an alternative to or more meaningful than net income 
(loss) or net cash provided by (used in) operating activities, as determined 
in accordance with IFRS, as an indication of MEG's performance. The non-IFRS 
operating earnings and cash operating netback measures are reconciled to net 
income (loss), while cash flow from operations is reconciled to net cash 
provided by (used in) operating activities, as determined in accordance with 
IFRS, under the heading "Non-IFRS Measurements" in MEG's Management's 
Discussion and Analysis pertaining to the second quarter of 2013.

MEG Energy Corp. is focused on sustainable in situoil sands development and 
production in the southern Athabasca oil sands 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."





Investors Helen Kelly Director, Investor Relations 403-767-6206 
helen.kelly@megenergy.com

Media Brad Bellows Director, External Communications 403-212-8705 
brad.bellows@megenergy.com

SOURCE: MEG Energy Corp.

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CO: MEG Energy Corp.
ST: Alberta
NI: OIL ERN CONF 

-0- Jul/30/2013 09:00 GMT


 
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