MEG Energy reports strong second quarter 2011 financial and operating results
CALGARY, July 27, 2011 /CNW/ --
CALGARY, July 27, 2011 /CNW/ - MEG Energy Corp. ('MEG' or the
'Corporation') reported second quarter 2011 net earnings of $42.5
million ($0.21 per share, diluted) compared to a loss of $34.9 million
(loss of $0.21 per share, diluted) in the second quarter of 2010.
Operating earnings in the second quarter 2011 were $36.4 million ($0.18
per share, diluted), compared to $13.4 million ($0.08 per share,
diluted) in the second quarter of 2010. Cash flow from operations for
the second quarter of 2011 was $88.1 million ($0.44 per share, diluted)
compared to $51.1 million ($0.29 per share, diluted) in the second
quarter of 2010.
Highlights for the second quarter include:
-- Higher bitumen realization and strong operational reliability
contributed to record cash operating netbacks of $46.55 per
barrel compared with $31.84 per barrel for the second quarter
of 2010 and $36.88 in the first quarter of 2011; and
-- Approval from MEG's Board of Directors to complete the
Stonefell Terminal.
Production averaged 27,826 barrels of bitumen per day ('bbls/d') during
the second quarter of 2011, approximately 10% above the nominal design
capacity of the facilities, compared to 24,412 bbls/d in the second
quarter of 2010 and 27,653 bbls/d in the first quarter of 2011. The
high reliability of the Christina Lake facilities has enabled MEG to
sustain high production rates following the successful ramp up of Phase
2 operations. The steam to oil ratio ('SOR') in the second quarter of
2011 was 2.5, compared with a design SOR of 2.8, and SORs of 2.5 in
both the second quarter of 2010 and the first quarter of 2011.
Operating costs during the second quarter of 2011 averaged $14.13 per
barrel, compared to $17.84 in the second quarter of 2010 and $14.22 in
the first quarter of 2011. Non-energy costs averaged $8.74 per barrel
in the second quarter of 2011, compared to $11.89 in the second quarter
of 2010 and $8.68 in the first quarter of 2011. After including the
contribution from power revenue, net operating costs decreased to
$11.36 per barrel for the second quarter of 2011 compared to $12.60 per
barrel for the second quarter of 2010 and $8.63 in the first quarter of
2011. Cash operating netbacks were strong, at $46.55 per barrel versus
$36.88 per barrel in the first quarter of 2011.
'Our record performance is a reflection of the quality of our reservoir
and our focus on the reliability and efficiencies of our operations. By
incorporating learnings from our existing operations, we strive for
continuous improvement in each and every phase that we will add over
the next decade,' said Bill McCaffrey, Chairman, President and CEO.
During the quarter the Corporation received approval from its Board of
Directors to complete the construction of the Stonefell Terminal, a
900,000 barrel storage facility located in Alberta's Industrial
Heartland. The Stonefell Terminal, in addition to the Corporation's
50% working interest in the Access Pipeline and the Sturgeon Terminal,
enables MEG to distribute blended bitumen to multiple markets and
gather condensate supplies from multiple sources including rail
offloading facilities and third-party pipelines, such as Enbridge,
Trans Mountain, Keystone and Southern Lights. The storage capacity of
the Stonefell Terminal, combined with the connectivity provided by the
Access Pipeline and the Sturgeon Terminal, will enable the Corporation
to maximize the value of every barrel produced by enhancing realized
prices and mitigating differential and cost risks in the market. The
Corporation is targeting completion of the terminal in 2013.
As at June 30, 2011, detailed engineering for the Christina Lake Phase
2B project was 71% complete and capital commitments for major equipment
and materials were 75% complete. Construction activities include the
on-going piling program, the pouring of concrete equipment foundations,
major vessel fabrications and the completion of 1,000 beds in the
construction camp. Overall construction of the Phase 2B project is
approximately 15% complete. To date, the Corporation had incurred
$390.2 million of the total $1.4 billion estimated cost to complete the
project.
Management reiterates its production and operating cost guidance for
2011. Production is expected to average between 25,000 and 27,000
bbls/day, taking into account a scheduled plant turnaround in September
2011. Non-energy operating costs are expected to average $9 to $11/bbl.
Capital investment for 2011 is expected to be approximately $1.0 billion
with the majority being invested in MEG's strategic plan of growing
bitumen production capacity to 260,000 bbls/day by 2020. Capital
investment totalled $421.5 million for the six months ended June 30,
2011.
A full copy of MEG's second quarter financial statements and MD&A can be
downloaded at http://www.megenergy.com/financials or www.sedar.com.
MEG Energy will host a conference call today, July 27, 2011, at 7:30
a.m. MT (9:30 a.m. ET) to review its second quarter 2011 operating and
financial results. To participate in the conference call, please dial
1 (888) 231-8191 (North American toll-free) or 1 (647) 427-7450. An
archived recording of the call will be available from 10:30 a.m. MT on
July 27, 2011 until 10:00 p.m. MT, August 24, 2011. To access the
recording, please dial toll-free 1 (855) 859-2056 or 1 (416) 849-0833
and enter the conference password 83415117.
Second Quarter Highlights
Three months ended June 30 Six months ended June
30
($/bbl unless 2011 2010 2011 2010
specified)
Bitumen production 27,826 24,412 27,740 18,935
- bbls/d
Steam to oil ratio 2.5 2.5 2.5 2.8
West Texas 102.56 78.03 98.33 78.37
Intermediate (WTI)
US$/bbl
Differential - 22.9% 24.0% 26.0% 21.7%
WTI/Blend %
Bitumen 62.78 47.77 56.23 50.35
realization
Operating costs:
Energy 5.39 5.95 5.47 8.26
Non-energy 8.74 11.89 8.71 15.97
Operating costs 14.13 17.84 14.18 24.23
Power sales (2.77) (5.24) (4.17) (5.23)
Net operating 11.36 12.60 10.01 19.00
costs
Cash operating 46.55 31.84 41.75 27.19
netback
Net income (loss) 42,537 (34,853) 87,915 (32,942)
- $000
Per share, 0.21 (0.21) 0.44 (0.19)
diluted
Operating earnings 36,410 13,404 57,271 (1,310)
(loss) - $000
Per share, 0.18 0.08 0.29 (0.01)
diluted
Cash flow from 88,120 51,114 157,452 52,781
operations - $000
Per share, 0.44 0.29 0.80 0.30
diluted
Cash and 1,926,429 766,160 1,926,429 766,160
short-term
investments - $000
Long-term debt - 1,660,445 1,037,249 1,660,445 1,037,249
$000
Capital investment 209,628 158,085 421,515 249,671
- $000
Forward-Looking Information
This press release may contain forward-looking information including but
not limited to: expectations of future production, operating costs and
capital investments; the anticipated capital requirements, timing for
receipt of regulatory approvals, development plans, timing for
completion, production capacities and performance of the future phases
and expansions of the Christina Lake project, the Surmont project and
MEG's other properties and facilities; and the anticipated sources of
funding for 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 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 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 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. The forward-looking
information included in this press release is expressly qualified in
its entirety by the foregoing cautionary statements. Unless otherwise
stated, the forward-looking information included in this press release
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 'Risk
Factors' and 'Regulatory Matters' within MEG's annual information form
dated February 24, 2011 (the 'AIF') along with MEG's other public
disclosure documents. A copy of the AIF and of 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 press release includes references to financial measures commonly
used in the crude oil and natural gas industry, such as net bitumen
revenue, 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
the Corporation may not be comparable to similar measures presented by
other companies. The Corporation uses these non-IFRS measures to help
evaluate its performance. Management considers net bitumen revenue,
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 the Corporation'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 or net cash provided
by operating activities, as determined in accordance with IFRS, as an
indication of the Corporation's performance. The non-IFRS operating
earnings and cash operating netback measures are reconciled to net
income, 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 the Corporation's
2011 second quarter report.
About MEG
MEG is focused on sustainable in situ oil sands development and production in the southern Athabasca region
of Alberta, Canada. MEG is actively developing enhanced oil recovery
projects that utilize SAGD extraction methods.
For more information about MEG please visit our web site at www.megenergy.com.
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John Rogers
VP Investor Relations
(403) 770-5335
john.rogers@megenergy.com
or
Helen Kelly
Director Investor Relations
(403) 767-6206
helen.kelly@megenergy.com