Production increase reflects continuing success in the ramp-up of Phase 2B and
the RISER initiative
CALGARY, April 30, 2014 /CNW/ - MEG Energy Corp. today reported first quarter
2014 operational and financial results. Highlights include:
-- Record cash flow from operations of $157.0 million;
-- Record quarterly production of 58,643 barrels per day (bpd), an
increase of 80% over first quarter 2013 production volumes
driven by the continuing ramp-up of production at Christina
Lake Phase 2B and MEG's RISER initiative;
-- Quarterly exit rate production for the month of March was over
60,600 bpd, supporting targeted annual average production of
60,000 to 65,000 bpd in 2014 and 80,000 bpd by 2015; and
-- First quarter non-energy operating costs of $9.05 per barrel,
in line with annual guidance of an average of $8 to $10 per
"The first quarter has set the stage for a very solid year," said Bill
McCaffrey, MEG President and Chief Executive Officer. "The implementation of
RISER at Phase 1 and 2 has already exceeded our initial expectations. With
this strong performance, combined with the steady production ramp-up we are
seeing at Phase 2B, we believe we are well on track to achieve our 2014
average production target of 60,000 to 65,000 barrels per day, as well as our
80,000 barrels per day target by 2015."
With the benefits of its RISER initiative at its Phase 1 and 2 assets and the
ramp-up of production from Phase 2B, MEG reached a production record of 58,643
bpd in the first quarter of 2014, an increase of 80% over first quarter 2013
volumes of 32,531 bpd.
"The ramp-up of Phase 2B to its initial design capacity of 35,000 barrels per
day is going very well," said McCaffrey. "We are now in the early planning
stages for a RISER initiative on Phase 2B, which will be the next phase of
production growth for the company".
RISER 2B will employ the same proven and proprietary technologies which drove
increased production and resource recovery at Phase 1 and 2, but this time
with a major brownfield expansion of the Phase 2B plant. RISER 2B is
anticipated to add significant production above initial design capacity at
lower capital and operating costs than a typical greenfield development.
Cash flow from operations reached a record $157.0 million ($0.70 per share,
diluted) for the first quarter of 2014, compared to $7.1 million ($0.03 per
share, diluted) for the same period of 2013. The increase in cash flow from
operations was primarily due to higher sales volumes and increased price
realizations per barrel.
First quarter 2014 net operating costs were $13.63 per barrel, compared to
$10.44 per barrel in the first quarter of 2013. The increase was primarily due
to higher natural gas energy prices. Net operating costs were partially offset
by electricity sales revenue from MEG's cogeneration facilities. Non-energy
costs were slightly higher at $9.05 per barrel in the first quarter of 2014,
compared to $8.81 in the first quarter of 2013, primarily due to the ramp-up
of Phase 2B.
Operating earnings, which are adjusted to exclude unrealized items such as
foreign exchange conversion, were $40.7 million in the first quarter of 2014,
compared to a loss of $36.7 million in the same period of 2013. Increased
operating earnings were primarily driven by higher sales volumes and increased
price realizations per barrel.
MEG recognized a net loss of $103.4 million for the first quarter of 2014
compared to a net loss of $71.3 million for same period in 2013. The loss in
the first quarter of 2014 was primarily due to the $159.5 million impact of
the conversion of the company's U.S. dollar denominated debt as a result of
the strengthening of the U.S. dollar against the Canadian dollar.
Average bitumen price realizations increased more than 60% in the first
quarter of 2014 compared to the previous quarter and were more than double the
price realizations in the first quarter of 2013. Continued logistics
enhancements, including recent additions of crude-by-rail facilities,
pipelines connecting the U.S. mid-continent to the U.S. Gulf Coast and
refinery modifications in the U.S. Midwest contributed to improved pricing.
The expected completion of the Flanagan-Seaway pipeline system in the second
half of 2014 will further enhance transportation logistics and is expected to
assist in alleviating ongoing pipeline congestion.
"The combination of increasing production volumes, low and stable operating
costs and our efforts to increase the market price we realize on every barrel
is anticipated to further strengthen our cash flow profile," said McCaffrey.
Operational and Financial Highlights
The following table summarizes selected operational and financial information
for the three months ended March 31. Dollar values are in Canadian dollars
unless otherwise noted.
Bitumen production - bpd 58,643 32,531
Bitumen sales - bpd 58,089 32,393
Steam-oil ratio (SOR) 2.5 2.5
West Texas Intermediate (WTI) US$/bbl 98.68 94.37
West Texas Intermediate (WTI) C$/bbl 108.89 95.21
Differential - Blend vs WTI - % 29.3% 41.9%
Bitumen realization - $/bbl 62.28 30.04
Net operating costs(1) - $/bbl 13.63 10.44
Non-energy operating costs - $/bbl 9.05 8.81
Cash operating netback(2) - $/bbl 43.51 17.90
Total cash capital investment(3) - $000 343,003 668,932
Net income (loss)(4) - $000 (103,441) (71,294)
Per share, diluted (0.46) (0.32)
Operating earnings (loss)(5) - $000 40,659 (36,712)
Per share, diluted(5) 0.18 (0.16)
Cash flow from operations(5) - $000 156,987 7,071
Per share, diluted(5) 0.70 0.03
Cash, cash equivalents and short-term 890,335 1,803,338
investments - $000
Long-term debt - $000 4,162,209 2,823,207
(1) Net operating costs include energy and non-energy operating costs,
reduced by power sales.
Cash operating netbacks are calculated by deducting the related
(2) diluent, transportation, field operating costs and royalties from
proprietary sales volumes and power revenues, on a per barrel
Includes capitalized interest of $19.5 million for the three months
(3) ended March 31, 2014 ($13.6 million for three months ended March
Includes a foreign exchange loss of $159.5 million on conversion of
(4) the U.S. dollar denominated debt for the three months ended March
31, 2014 ($49.3 million for the three months ended March 31, 2013).
(5) Please refer to Non-IFRS Financial Measures below.
A full version of MEG's First Quarter 2014 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 first quarter results at 7:30
a.m. Mountain Time (9:30 a.m. Eastern Time) on Wednesday, April 30. 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, expenses, cash flow,
operating costs, SORs, pricing differentials, reliability, profitability and
capital investments; estimates of reserves and resources; the anticipated
reductions in operating costs as a result of optimization and scalability of
certain operations; the anticipated capital requirements, timing for receipt
of regulatory approvals, development plans, timing for completion,
commissioning and start-up, capacities and performance of the Access Pipeline
expansion, the RISER initiative, the Stonefell Terminal, third party barging
and rail facilities, the future phases and expansions of the Christina Lake
project, the Surmont project and potential projects on the Growth Properties;
and the anticipated sources of funding for operations and capital investments.
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", "Regulatory Matters" and "Risk Factors" within MEG's Annual
Information Form dated March 5, 2014 (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 first quarter of 2014.
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."
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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