Annual production targeted to nearly double; planned capital investment sets
the foundation for further growth with focus on lower-cost 'brownfield'
CALGARY, Dec. 6, 2013 /CNW/ - MEG Energy Corp. released its 2014 capital
budget and guidance today. The company's plans include a capital program of
$1.8 billion, including $200 million available on a discretionary basis
subject to the timing of current and future projects. MEG has set a 2014
production target of 60,000 to 65,000 barrels per day (bpd), with a related
non-energy operating cost target of $8 to $10 per barrel.
-- Targeted 2014 annual production volumes nearly double 2013
guidance, supporting MEG's early 2015 goal of 80,000 bpd driven
by the implementation of the RISER 2 initiative and the ramp-up
of Christina Lake Phase 2B;
-- Investment in a major 'brownfield' expansion within Phase 2B,
which the company anticipates will raise its overall production
to a level of 115,000 to 125,000 bpd by early 2017, resulting
in approximately a 45 per cent compounded annual growth over
the next three years;
-- Investing in technology and infrastructure which will enable
the corporation to access the highest-priced markets in the
most cost-effective manner.
2014 Operations Guidance
"Strong results from the implementation of RISER in Christina Lake Phase 2,
combined with achieving first oil from our recently commissioned Phase 2B,
have set the foundation for a significant increase in production and cash
flow," said Bill McCaffrey, President and Chief Executive Officer.
2014 Budget 2013 Guidance % Change
Production (bpd) 60,000 - 65,000 32,000 - 35,000 +87%
Non-energy operating $8.00 - $10.00 $9.00 - $11.00 -11%
MEG's production targets from 2014 to 2017 result in a compounded annual
growth rate of approximately 45 per cent. As production levels increase, MEG
will continue its focus on putting downward pressure on its already
industry-leading non-energy operating costs.
"During 2014, we are working to significantly increase our production levels.
We have already invested the capital required to reach our production target
of 80,000 barrels per day by early 2015. The company is now focusing its
capital investment on the next stage of growth, laying the groundwork for a
major brownfield expansion of Phase 2B," McCaffrey said.
2014 Capital Investment
MEG's 2014 base capital program includes $920 million in growth capital (58%),
$445 million focused on marketing initiatives (28%) and $235 million in
sustaining and other capital (approximately 14%).
"We believe our capital allocation plans represent the right balance between
our key strategies of lower-cost intraphase production growth, greenfield
expansion, value-added infrastructure and the necessary sustaining capital to
ensure steady and efficient operations," said McCaffrey.
The capital investment for RISER at Christina Lake Phases 1 and 2 (RISER 2) is
now complete, with a resulting increase in production capacity of 60 per cent
at a capital intensity of approximately $20,000 per barrel per day. With the
demonstrated success of RISER 2, the company is now advancing its RISER 2B
program, which will include MEG's proprietary eMSAGP technology and a major
brownfield expansion of MEG's Phase 2B facilities. This project is effectively
a 'phase within a phase' that is anticipated to result in ultimate production
levels from Phase 2B of 75,000 to 85,000 bpd, an increase of nearly 130% over
its initial design.
"Brownfield expansions provide production growth similar to what we would
expect from a 'greenfield' expansion at about two-thirds of the capital cost,
while also helping to accelerate the timing of incremental production," said
McCaffrey. "In addition to lower capital costs and accelerated production, we
also anticipate benefits in terms of lower operating costs, reduced greenhouse
gas intensities and higher resource recovery rates. With these targeted
benefits, our goal will be to optimize existing assets through our RISER 2B
initiative, before we launch the next greenfield project."
In addition to the intermediate growth capital directed to RISER 2B, MEG will
allocate $580 million to position itself for longer term growth. This
investment includes $275 million towards engineering and long lead-time items
for Phase 3A, in order to prepare for the next growth platform in the
company's portfolio once Phase 2B is fully optimized.
MEG is also planning a facility which will remove diluent from a significant
portion of the company's bitumen blend that is to be shipped by rail. The
diluent would then be recycled back to the Christina Lake project site. The
resulting product would be transported by rail to refining markets at
substantially reduced shipping and blending costs. Capital investment of $75
million in 2014 is planned for the project, with completion targeted for late
On a longer-term strategic basis, MEG has also committed $125 million in 2014
for the construction of a Field Demonstration Pilot project of the company's
proprietary HI-Q™ technology. This technology, which has been successfully
demonstrated over a number of years on a smaller scale, is designed to modify
MEG's bitumen production to a HI-Q™ product suitable for shipping by
pipeline without diluent.
As previously announced, MEG is also supporting its marketing strategy with
the investment of approximately $210 million in 2014 for the continuing
expansion of the jointly-owned Access Pipeline.
"The diluent recovery facility will have the dual effect of reducing MEG's
requirement for diluent supply, while effectively increasing our rail shipping
capacity," said McCaffrey. "Additionally, our HI-Q™ technology has the
potential to offer tremendous benefits as MEG's production grows. The benefits
of shipping HI-Q™ include substantially reduced diluent supply requirements,
freeing-up pipeline capacity through the removal of diluent, and expanded
2014 Capital Budget
Intraphase growth - RISER 2B 340
Christina Lake Phase 3A 275
Resource development 115
Growth infrastructure 85
Enhancements and other 105
Access expansion 210
Diluent Removal Facility 75
HI-Q Field Demonstration Project 125
Sustaining and maintenance 135
Base capital program 1,600
Discretionary capital 200
Base plus discretionary capital 1,800
This news release may contain forward-looking information including but not
limited to: expectations of future production, SORs, operating costs and
capital investments; the commissioning and start-up of the completed 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 February 27, 2013 (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 2014 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 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."
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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CO: MEG Energy Corp.
-0- Dec/06/2013 12:00 GMT
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