Operational and financial foundations in place to achieve targeted production
increase of approximately 140% by early 2015
CALGARY, Oct. 24, 2013 /CNW/ - MEG Energy Corp. today reported third quarter
2013 operational and financial results. Highlights include:
-- Record quarterly production of 34,246 barrels per day (bpd) and
record year-to-date production of 32,980 bpd, 20% higher than
comparative 2012 year-to-date volumes;
-- Record quarterly cash flow from operations of $144.5 million,
driven by increased production levels and strong cash operating
-- First steam and the start of commissioning of the central
processing facilities at MEG's Christina Lake Phase 2B;
-- Continuing progress on MEG's marketing strategy, with the
commissioning of the company's Stonefell Terminal underway and
the completion of pipeline tie-ins to the nearby Canexus
"MEG's third quarter performance reinforces our strategy and is a good
illustration of the standard that we are working toward - steadily growing
production volumes combined with attaining the best prices for our product,"
said Bill McCaffrey, President and Chief Executive Officer. "We feel confident
that, as we continue to implement the RISER initiative, execute major project
expansion phases and advance our marketing efforts, we'll move toward
achieving this standard on an ongoing basis."
MEG's production during the third quarter of 2013 increased to a quarterly
record volume of 34,246 bpd from a third quarter 2012 production average of
23,941 bpd, which was impacted by planned maintenance. For the first nine
months of 2013, average production increased by 20% to 32,980 bpd from 27,592
bpd in the same period of 2012. Nine month production volumes for both 2012
and 2013 were impacted by planned maintenance.
"With the strong performance to date, we anticipate finishing the year in the
upper half of our production guidance of 32,000 to 35,000 barrels per day and
the lower half of non-energy operating cost guidance of $9 to $11 per barrel,"
Third quarter 2013 non-energy operating costs averaged $9.20 per barrel
compared to $15.23 in the same period of 2012. Net operating costs, which
include natural gas energy costs, as well as the benefit of electricity sales,
were $9.40 per barrel in the third quarter of 2013, compared to $15.61 in the
third quarter of 2012. Non-energy and net operating costs for the comparable
2012 period were impacted by planned maintenance.
Higher production volumes, lower operating costs and stronger price
realizations in the third quarter of 2013 contributed to record quarterly cash
flow from operations of $144.5 million ($0.64 per share, diluted), compared to
$24.4 million ($0.12 per share, diluted) in the third quarter of 2012.
Operating earnings, which are adjusted for items that are not indicative of
operating performance, were $56.2 million ($0.25 per share, diluted) in the
third quarter of 2013 compared to an operating loss of $12.9 million ($0.07
per share, diluted) in the same period of 2012, reflecting the same factors
that impacted cash flow from operations.
MEG recorded net income of $115.4 million ($0.51 per share, diluted) in the
third quarter of 2013 compared to net income of $47.5 million ($0.24 per
share, diluted) in the third quarter of 2012. The increase reflects the same
factors that impacted cash flow from operations and operating earnings.
Capital and Growth Strategy
MEG's 2013 capital investment program has focused on cost effective
intra-phase production growth through the RISER initiative, the completion of
the Christina Lake Phase 2B project, and infrastructure investment to support
strong and stable product pricing.
After successfully piloting the RISER initiative at Christina Lake Phase 1,
MEG has continued over the third quarter to roll out RISER to Phase 2 assets.
The majority of the capital investment needed to implement RISER in Phase 2 is
now complete. MEG has also continued to incorporate related reservoir recovery
enhancements and processing facility modifications into Phase 2B, with the
goal of ultimately increasing production beyond the initial Phase 2B design
capacity of 35,000 bpd.
Steam injection into Phase 2B well pairs commenced in the third quarter. MEG
is also taking advantage of previous integration work to use Phase 2
production to accelerate the commissioning of Phase 2B oil treatment
facilities. Phase 2B is currently anticipated to begin first production in the
fourth quarter of 2013 and is expected to ramp-up to initial design capacity
In alignment with the company's production growth plans, MEG has also advanced
its marketing strategy.
"Our objective is to work toward a 'floor price' for our production that is
closely tied to world-pricing for comparable crude oils," said McCaffrey.
"While prices for Canadian heavy oil strengthened during the third quarter, we
continue to focus on taking control of marketing and transportation options
that will provide us with the flexibility to reach the markets of our choice,
support higher netbacks and cash flows, and reduce price volatility."
The hub of MEG's marketing strategy is the 900,000 barrel Stonefell Terminal,
which is currently being commissioned. Stonefell is located in the Edmonton
area and provides access to current and proposed Canadian crude oil export
pipelines, including connections to the Flanagan/Seaway system in which MEG
has firm capacity starting mid-2014. Stonefell also serves as the launch point
for connections to alternate transportation options, including connections to
barging options and the Canexus Bruderheim rail-loading facility, which is
To support projected capital spending plans in 2014, most of which will be
directed to future growth beyond the company's goal of 80,000 bpd by early
2015, MEG announced on October 1 the successful closing of an offering of
US$800 million in senior unsecured notes. As with MEG's previous financings,
the recent offering is covenant-lite in structure. Its 2024 maturity is
staggered relative to other debt maturities and is timed to coincide with
significantly higher projected cash flows. With a strong financial base,
combined with projected production increases and related cash flows, MEG
believes it is well-positioned to fund its 2014 capital program.
"We've achieved several key milestones in the third quarter as we continue to
put innovative technology, major project expansions and new market initiatives
in place and move toward our near-term target of increasing production to
80,000 barrels in early 2015," said McCaffrey. "As we advance our plans, we're
looking forward to a strong finish to 2013 and an even stronger 2014."
Operational and Financial Highlights
Three months ended Nine months ended
September 30 September 30
2013 2012 2013 2012
bpd 34,246 23,941 32,980 27,592
Steam to oil
ratio (SOR) 2.5 2.5 2.4 2.4
(WTI) US$/bbl 105.83 92.22 98.14 96.21
Blend vs WTI -
% 21.4% 32.2% 29.7% 31.4%
$/bbl 74.33 46.49 53.35 47.43
$/bbl 9.40 15.61 9.56 10.40
$/bbl 59.59 27.85 40.32 34.07
$000 ((3)) 476,362 399,659 1,799,121 1,103,598
(loss) - $000 115,383 47,474 (18,223) 71,309
diluted 0.51 0.24 (0.08) 0.36
- $000((4)) 56,171 (12,883) 33,071 21,780
diluted((4)) 0.25 (0.07) 0.15 0.11
Cash flow from
$000((4)) 144,521 24,442 230,776 156,408
diluted((4)) 0.64 0.12 1.03 0.79
$000 647,096 1,607,036 647,096 1,607,036
- $000 2,857,740 2,461,676 2,857,740 2,461,676
(1) Net operating costs include energy and non-energy operating costs,
reduced by power sales for the period.
Cash operating netbacks are calculated by deducting the related
(2) diluent, transportation, field operating costs and royalties from
production and power revenues, on a per barrel basis.
Includes capitalized interest of $21,773 and $53,618 for the three
(3) and nine months ended September 30, 2013 respectively ($9,501 and
$20,254 for the three and nine months ended September 30, 2012).
(4) Please refer to Non-IFRS Financial Measures below.
A full version of MEG's Third Quarter 2013 Report to Shareholders, including
the 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 third quarter results at 7:30
a.m. Mountain Time (9:30 a.m. Eastern Time) on Thursday, October 24, 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.
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 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 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 third quarter of 2013.
MEG Energy Corp. is focused on sustainable in situoil sands development and
production in the southern Athabascaoil 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."
SOURCE MEG Energy Corp.
Investors Helen Kelly Director, Investor Relations 403-767-6206
Media Brad Bellows Director, External Communications 403-212-8705
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