MEG Energy reports record quarterly production and cash flow

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
        netbacks;
    --  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
        rail-loading facility.

"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," 
said McCaffrey.

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 2014.

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 
nearing completion.

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

Bitumen                                      
production -
bpd                    34,246    23,941              32,980      27,592

Steam to oil                                               
ratio (SOR)               2.5       2.5               2.4           2.4
                                                                       

West Texas                                   
Intermediate                 
(WTI) US$/bbl          105.83     92.22               98.14       96.21

Differential -                               
Blend vs WTI -
%                       21.4%     32.2%               29.7%       31.4%
                                                                       

Bitumen                                      
realization -                
$/bbl                   74.33     46.49               53.35       47.43
                                                                       

Net operating                                
costs((1) )-                 
$/bbl                    9.40     15.61                9.56       10.40
                                                                       

Cash operating                               
netback((2)) -               
$/bbl                   59.59     27.85               40.32       34.07
                                                                       

Capital cash                                 
investment -
$000 ((3))            476,362   399,659           1,799,121   1,103,598
                                                                       

Net income                                   
(loss) - $000         115,383    47,474            (18,223)      71,309

  Per share,                                 
  diluted                0.51      0.24              (0.08)        0.36

Operating                                    
earnings (loss)
- $000((4))            56,171  (12,883)              33,071      21,780

  Per share,                                 
  diluted((4))           0.25    (0.07)                0.15        0.11

Cash flow from                               
operations -
$000((4))             144,521    24,442             230,776     156,408

  Per share,                                 
  diluted((4))           0.64      0.12                1.03        0.79
                                                                       

Cash, cash                                   
equivalents and
short-term

investments -
$000                  647,096 1,607,036             647,096   1,607,036

Long-term debt                               
- $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. 
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 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 
helen.kelly@megenergy.com 
Media Brad Bellows Director, External Communications 403-212-8705 
brad.bellows@megenergy.com 
To view this news release in HTML formatting, please use the following URL: 
http://www.newswire.ca/en/releases/archive/October2013/24/c6705.html 
CO: MEG Energy Corp.
ST: Alberta
NI: OIL ERN CONF  
-0- Oct/24/2013 09:00 GMT
 
 
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