News Feed Item

MEG Energy Reports Fifth Consecutive Quarter of Record Production Growth and Increased 2014 Production Guidance

Record cash flow for the quarter driven by increased production and strong price realizations

CALGARY, ALBERTA -- (Marketwired) -- 07/30/14 -- MEG Energy Corp. (TSX: MEG) today reported second quarter 2014 operational and financial results. Highlights include:

--  Record cash flow from operations of $261.7 million;
--  Record quarterly production of 68,984 barrels per day (bpd), nearly 18
    per cent higher than the first quarter and 115 per cent higher than the
    second quarter of 2013, all while factoring in the impact of planned
    maintenance on Phases 1 and 2;
--  Christina Lake Phase 2B reaching design capacity seven months after
    first oil production;
--  2014 production guidance increased eight per cent to 65,000 to 70,000
    bpd, reflecting strong operational performance;
--  Completion of the Phase 1 and 2 plant turnaround, with inspections and
    maintenance confirming assets are in good operating condition.

"Exceptional operating performance and higher realized pricing drove record cash flow in the quarter," said Bill McCaffrey, MEG President and Chief Executive Officer. "This step change in our cash flow represents the beginning of a new chapter for MEG. Internal cash flow is now poised to be the major contributor to our future capital funding plans, with this past quarter being an important milestone."

Cash flow from operations in the second quarter of 2014 reached a record $261.7 million ($1.16 per share, diluted) compared to $79.2 million ($0.35 per share, diluted) for the same period of 2013. The increase in cash flow from operations was primarily due to higher production volumes and increased netbacks per barrel.

MEG's production during the second quarter of 2014 increased nearly 115 per cent to 68,984 bpd compared to second quarter 2013 production of 32,144 bpd. For the first six months of 2014, production approximately doubled to 63,842 bpd compared to 32,337 bpd in the first half of 2013. Quarterly and year-to-date production volumes in both comparative periods were impacted by planned maintenance.

"Phase 2B reached planned production volumes seven months after first oil, just prior to the Phase 1 and 2 plant turnaround," said McCaffrey. "We are looking to a strong second half and have raised our production guidance to 65,000 to 70,000 barrels per day for the year."

Second quarter 2014 non-energy operating costs were $9.64 per barrel, down from $10.00 per barrel in the second quarter of 2013, including costs for planned maintenance. Net operating costs were $14.49 per barrel for the second quarter of 2014 compared to $8.85 per barrel in the second quarter of 2013. This reflects lower non-energy operating costs offset by increased natural gas costs and lower electricity sales revenues from the company's cogeneration facilities. MEG's steam-oil ratio declined to 2.4 in the second quarter of 2014 from 2.5 in the first quarter, reflecting the performance of RISER in Phases 1 and 2 as well as the ramp-up of Phase 2B.

Average bitumen price realizations increased approximately 17% in the second quarter of 2014 compared to the previous quarter and were approximately 35% higher than price realizations in the second quarter of 2013. Continued logistics enhancements, including increased crude-by-rail transportation, 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 anticipated completion of the Flanagan-Seaway pipeline system in the second half of 2014 is expected to further enhance transportation logistics and pricing.

Operating earnings, which are adjusted for items that are not indicative of operating performance, were $111.1 million ($0.49 per share, diluted) in the second quarter of 2014 compared to $13.6 million ($0.06 per share, diluted) in the same period of 2013, reflecting the same factors that impacted cash flow from operations.

Net income was $249.0 million ($1.11 per share, diluted) in the second quarter of 2014, compared to a net loss of $62.3 million ($0.28 per share, diluted) in the second quarter of 2013.

Operational and Financial Highlights

The following table summarizes selected operational and financial information for the three and six months ended June 30. Dollar values are in Canadian dollars unless otherwise noted.

                                     Three months ended    Six months ended
                                                June 30             June 30
                                         2014      2013      2014      2013
Bitumen production - bbls/d            68,984    32,144    63,842    32,337
Bitumen sales - bbls/d                 70,849    32,175    64,504    32,284
Steam to oil ratio (SOR)                  2.4       2.3       2.4       2.4

West Texas Intermediate (WTI)          102.99     94.22    100.84     94.30
West Texas Intermediate (WTI) C$/bbl   112.31     96.42    110.62     95.82
Differential - WTI vs AWB - %            24.1%     27.1%     26.3%     34.7%

Bitumen realization - $/bbl             72.75     53.98     68.06     42.04

Net operating costs(1) - $/bbl          14.49      8.85     14.11      9.65

Non-energy operating costs - $/bbl       9.64     10.00      9.38      9.41

Cash operating netback(2) - $/bbl       51.45     41.93     47.89     29.94

Total cash capital investment(3) -    320,826   653,827   663,829 1,322,759

Net income (loss)(4) - $000           248,954   (62,312)  145,513  (133,606)
  Per share, diluted                     1.11     (0.28)     0.65     (0.60)
Operating earnings (loss)(5) - $000   111,139    13,612   151,798   (23,100)
  Per share, diluted(5)                  0.49      0.06      0.68     (0.10)
Cash flow from operations(5) - $000   261,713    79,184   418,700    86,255
  Per share, diluted(5)                  1.16      0.35      1.86      0.39

Cash, cash equivalents and short-
 term investments - $000              839,870 1,203,457   839,870 1,203,457
Long-term debt - $000               4,016,257 2,923,382 4,016,257 2,923,382

(1) Net operating costs include energy and non-energy operating costs, reduced by power sales. Please refer to Cash Operating Netbacks discussed further under the heading "RESULTS OF OPERATIONS" in the Company's second quarter MD&A.

(2) Cash operating netbacks are calculated by deducting the related diluent, transportation, field operating costs and royalties from proprietary sales volumes and power revenues, on a per barrel basis. Please refer to note 3 of the Cash Operating Netbacks table within "RESULTS OF OPERATIONS" in the Company's second quarter MD&A.

(3) Includes capitalized interest of $22.1 million and $41.6 million for the three and six months ended June 30, 2014, respectively ($18.2 million and $31.8 million respectively, for the three months and six months ended June 30, 2013).

(4) Includes a foreign exchange gain of $144.1 million on conversion of the U.S. dollar denominated debt for the three months ended June 30, 2014. Includes a foreign exchange loss of $15.4 million on conversion of the U.S. dollar denominated debt for the six months ended June 30, 2014. Includes foreign exchange losses on conversion of U.S. dollar denominated debt of $100.9 million and $150.1 million, respectively, for the three and six months ended June 30, 2013.

(5) Please refer to Non-IFRS Financial measures below.

A full version of MEG's Second 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 second quarter results at 7:30 a.m. Mountain Time (9:30 a.m. Eastern Time) on July 30, 2014. The U.S./Canada toll-free conference call number is 1 866-223-7781. The international/local conference call number is 416-340-2216.

Forward-Looking Information

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 to be 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 2014.

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."

More Stories By Marketwired .

Copyright © 2009 Marketwired. All rights reserved. All the news releases provided by Marketwired are copyrighted. Any forms of copying other than an individual user's personal reference without express written permission is prohibited. Further distribution of these materials is strictly forbidden, including but not limited to, posting, emailing, faxing, archiving in a public database, redistributing via a computer network or in a printed form.

Latest Stories
Most people haven’t heard the word, “gamification,” even though they probably, and perhaps unwittingly, participate in it every day. Gamification is “the process of adding games or game-like elements to something (as a task) so as to encourage participation.” Further, gamification is about bringing game mechanics – rules, constructs, processes, and methods – into the real world in an effort to engage people. In his session at @ThingsExpo, Robert Endo, owner and engagement manager of Intrepid D...
WebRTC adoption has generated a wave of creative uses of communications and collaboration through websites, sales apps, customer care and business applications. As WebRTC has become more mainstream it has evolved to use cases beyond the original peer-to-peer case, which has led to a repeating requirement for interoperability with existing infrastructures. In his session at @ThingsExpo, Graham Holt, Executive Vice President of Daitan Group, will cover implementation examples that have enabled ea...
SYS-CON Events announced today that Enzu will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Enzu’s mission is to be the leading provider of enterprise cloud solutions worldwide. Enzu enables online businesses to use its IT infrastructure to their competitive advantage. By offering a suite of proven hosting and management services, Enzu wants companies to focus on the core of their online busine...
@DevOpsSummit has been named the ‘Top DevOps Influencer' by iTrend. iTrend processes millions of conversations, tweets, interactions, news articles, press releases, blog posts - and extract meaning form them and analyzes mobile and desktop software platforms used to communicate, various metadata (such as geo location), and automation tools. In overall placement, @DevOpsSummit ranked as the number one ‘DevOps Influencer' followed by @CloudExpo at third, and @MicroservicesE at 24th.
SYS-CON Events announced today that Roundee / LinearHub will exhibit at the WebRTC Summit at @ThingsExpo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. LinearHub provides Roundee Service, a smart platform for enterprise video conferencing with enhanced features such as automatic recording and transcription service. Slack users can integrate Roundee to their team via Slack’s App Directory, and '/roundee' command lets your video conference ...
Enterprise IT has been in the era of Hybrid Cloud for some time now. But it seems most conversations about Hybrid are focused on integrating AWS, Microsoft Azure, or Google ECM into existing on-premises systems. Where is all the Private Cloud? What do technology providers need to do to make their offerings more compelling? How should enterprise IT executives and buyers define their focus, needs, and roadmap, and communicate that clearly to the providers?
In the next forty months – just over three years – businesses will undergo extraordinary changes. The exponential growth of digitization and machine learning will see a step function change in how businesses create value, satisfy customers, and outperform their competition. In the next forty months companies will take the actions that will see them get to the next level of the game called Capitalism. Or they won’t – game over. The winners of today and tomorrow think differently, follow different...
SYS-CON Events announced today that Sheng Liang to Keynote at SYS-CON's 19th Cloud Expo, which will take place on November 1-3, 2016 at the Santa Clara Convention Center in Santa Clara, California.
So you think you are a DevOps warrior, huh? Put your money (not really, it’s free) where your metrics are and prove it by taking The Ultimate DevOps Geek Quiz Challenge, sponsored by DevOps Summit. Battle through the set of tough questions created by industry thought leaders to earn your bragging rights and win some cool prizes.
More and more brands have jumped on the IoT bandwagon. We have an excess of wearables – activity trackers, smartwatches, smart glasses and sneakers, and more that track seemingly endless datapoints. However, most consumers have no idea what “IoT” means. Creating more wearables that track data shouldn't be the aim of brands; delivering meaningful, tangible relevance to their users should be. We're in a period in which the IoT pendulum is still swinging. Initially, it swung toward "smart for smar...
DevOps is being widely accepted (if not fully adopted) as essential in enterprise IT. But as Enterprise DevOps gains maturity, expands scope, and increases velocity, the need for data-driven decisions across teams becomes more acute. DevOps teams in any modern business must wrangle the ‘digital exhaust’ from the delivery toolchain, "pervasive" and "cognitive" computing, APIs and services, mobile devices and applications, the Internet of Things, and now even blockchain. In this power panel at @...
Without lifecycle traceability and visibility across the tool chain, stakeholders from Planning-to-Ops have limited insight and answers to who, what, when, why and how across the DevOps lifecycle. This impacts the ability to deliver high quality software at the needed velocity to drive positive business outcomes. In his general session at @DevOpsSummit at 19th Cloud Expo, Eric Robertson, General Manager at CollabNet, will discuss how customers are able to achieve a level of transparency that e...
SYS-CON Events announced today that SoftNet Solutions will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. SoftNet Solutions specializes in Enterprise Solutions for Hadoop and Big Data. It offers customers the most open, robust, and value-conscious portfolio of solutions, services, and tools for the shortest route to success with Big Data. The unique differentiator is the ability to architect and ...
"Matrix is an ambitious open standard and implementation that's set up to break down the fragmentation problems that exist in IP messaging and VoIP communication," explained John Woolf, Technical Evangelist at Matrix, in this SYS-CON.tv interview at @ThingsExpo, held Nov 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
In past @ThingsExpo presentations, Joseph di Paolantonio has explored how various Internet of Things (IoT) and data management and analytics (DMA) solution spaces will come together as sensor analytics ecosystems. This year, in his session at @ThingsExpo, Joseph di Paolantonio from DataArchon, will be adding the numerous Transportation areas, from autonomous vehicles to “Uber for containers.” While IoT data in any one area of Transportation will have a huge impact in that area, combining sensor...