Welcome!

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
 US$/bbl
West Texas Intermediate (WTI) C$/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
 $000

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."

Contacts:
MEG Energy Corp.
Investors
Helen Kelly
Director, Investor Relations
403-767-6206
[email protected]

MEG Energy Corp.
Media
Brad Bellows
Director, External Communications
403-212-8705
[email protected]

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
With more than 30 Kubernetes solutions in the marketplace, it's tempting to think Kubernetes and the vendor ecosystem has solved the problem of operationalizing containers at scale or of automatically managing the elasticity of the underlying infrastructure that these solutions need to be truly scalable. Far from it. There are at least six major pain points that companies experience when they try to deploy and run Kubernetes in their complex environments. In this presentation, the speaker will d...
While DevOps most critically and famously fosters collaboration, communication, and integration through cultural change, culture is more of an output than an input. In order to actively drive cultural evolution, organizations must make substantial organizational and process changes, and adopt new technologies, to encourage a DevOps culture. Moderated by Andi Mann, panelists discussed how to balance these three pillars of DevOps, where to focus attention (and resources), where organizations might...
The deluge of IoT sensor data collected from connected devices and the powerful AI required to make that data actionable are giving rise to a hybrid ecosystem in which cloud, on-prem and edge processes become interweaved. Attendees will learn how emerging composable infrastructure solutions deliver the adaptive architecture needed to manage this new data reality. Machine learning algorithms can better anticipate data storms and automate resources to support surges, including fully scalable GPU-c...
When building large, cloud-based applications that operate at a high scale, it's important to maintain a high availability and resilience to failures. In order to do that, you must be tolerant of failures, even in light of failures in other areas of your application. "Fly two mistakes high" is an old adage in the radio control airplane hobby. It means, fly high enough so that if you make a mistake, you can continue flying with room to still make mistakes. In his session at 18th Cloud Expo, Le...
Machine learning has taken residence at our cities' cores and now we can finally have "smart cities." Cities are a collection of buildings made to provide the structure and safety necessary for people to function, create and survive. Buildings are a pool of ever-changing performance data from large automated systems such as heating and cooling to the people that live and work within them. Through machine learning, buildings can optimize performance, reduce costs, and improve occupant comfort by ...
As Cybric's Chief Technology Officer, Mike D. Kail is responsible for the strategic vision and technical direction of the platform. Prior to founding Cybric, Mike was Yahoo's CIO and SVP of Infrastructure, where he led the IT and Data Center functions for the company. He has more than 24 years of IT Operations experience with a focus on highly-scalable architectures.
The explosion of new web/cloud/IoT-based applications and the data they generate are transforming our world right before our eyes. In this rush to adopt these new technologies, organizations are often ignoring fundamental questions concerning who owns the data and failing to ask for permission to conduct invasive surveillance of their customers. Organizations that are not transparent about how their systems gather data telemetry without offering shared data ownership risk product rejection, regu...
CI/CD is conceptually straightforward, yet often technically intricate to implement since it requires time and opportunities to develop intimate understanding on not only DevOps processes and operations, but likely product integrations with multiple platforms. This session intends to bridge the gap by offering an intense learning experience while witnessing the processes and operations to build from zero to a simple, yet functional CI/CD pipeline integrated with Jenkins, Github, Docker and Azure...
René Bostic is the Technical VP of the IBM Cloud Unit in North America. Enjoying her career with IBM during the modern millennial technological era, she is an expert in cloud computing, DevOps and emerging cloud technologies such as Blockchain. Her strengths and core competencies include a proven record of accomplishments in consensus building at all levels to assess, plan, and implement enterprise and cloud computing solutions. René is a member of the Society of Women Engineers (SWE) and a m...
Dhiraj Sehgal works in Delphix's product and solution organization. His focus has been DevOps, DataOps, private cloud and datacenters customers, technologies and products. He has wealth of experience in cloud focused and virtualized technologies ranging from compute, networking to storage. He has spoken at Cloud Expo for last 3 years now in New York and Santa Clara.
Enterprises are striving to become digital businesses for differentiated innovation and customer-centricity. Traditionally, they focused on digitizing processes and paper workflow. To be a disruptor and compete against new players, they need to gain insight into business data and innovate at scale. Cloud and cognitive technologies can help them leverage hidden data in SAP/ERP systems to fuel their businesses to accelerate digital transformation success.
Containers and Kubernetes allow for code portability across on-premise VMs, bare metal, or multiple cloud provider environments. Yet, despite this portability promise, developers may include configuration and application definitions that constrain or even eliminate application portability. In this session we'll describe best practices for "configuration as code" in a Kubernetes environment. We will demonstrate how a properly constructed containerized app can be deployed to both Amazon and Azure ...
Poor data quality and analytics drive down business value. In fact, Gartner estimated that the average financial impact of poor data quality on organizations is $9.7 million per year. But bad data is much more than a cost center. By eroding trust in information, analytics and the business decisions based on these, it is a serious impediment to digital transformation.
Digital Transformation: Preparing Cloud & IoT Security for the Age of Artificial Intelligence. As automation and artificial intelligence (AI) power solution development and delivery, many businesses need to build backend cloud capabilities. Well-poised organizations, marketing smart devices with AI and BlockChain capabilities prepare to refine compliance and regulatory capabilities in 2018. Volumes of health, financial, technical and privacy data, along with tightening compliance requirements by...
Predicting the future has never been more challenging - not because of the lack of data but because of the flood of ungoverned and risk laden information. Microsoft states that 2.5 exabytes of data are created every day. Expectations and reliance on data are being pushed to the limits, as demands around hybrid options continue to grow.