Press Release
All financial figures are in Canadian dollars ($ or C$) and all references to barrels are per barrel of bitumen unless otherwise noted. The Corporation’s Non-GAAP and Other Financial Measures are detailed in the Advisory section of this news release. They include: cash operating netback, bitumen realization net of transportation and storage expense, operating expenses net of power revenue, energy operating costs net of power revenue, non-energy operating costs, energy operating costs, adjusted funds flow, free cash flow and net debt.
CALGARY, AB, May 6, 2024 – MEG Energy Corp. (TSX: MEG) (“MEG” or the “Corporation”) reported its first quarter 2024 operational and financial results.
“MEG’s strong safety, operating, and financial performance in the first quarter of 2024 demonstrate the team’s focus on operations excellence,” said Darlene Gates, Chief Executive Officer. “Bitumen production averaged approximately 104,000 barrels per day during the quarter, and $217 million of free cash flow supported the repurchase of 4.7 million shares and $142 million of debt redemption. We expect that additional Canadian pipeline capacity from the imminent start up of TMX will narrow heavy oil differentials, reduce differential volatility and improve netbacks on all of MEG’s production.”
First quarter 2024 highlights include:
2024 |
2023 |
2022 |
||||||
($millions, except as indicated) |
Q1 |
Q4 |
Q3 |
Q2 |
Q1 |
Q4 |
Q3 |
Q2 |
Operational results: |
||||||||
Bitumen production – bbls/d |
104,088 |
109,112 |
103,726 |
85,974 |
106,840 |
110,805 |
101,983 |
67,256 |
Steam-oil ratio |
2.37 |
2.28 |
2.28 |
2.25 |
2.25 |
2.22 |
2.39 |
2.46 |
Bitumen sales – bbls/d |
105,534 |
112,634 |
101,625 |
83,531 |
106,480 |
113,582 |
95,759 |
73,091 |
Benchmark pricing: |
||||||||
WTI – US$/bbl |
76.96 |
78.32 |
82.26 |
73.78 |
76.13 |
82.65 |
91.55 |
108.41 |
Differential – WTI:AWB – Edmonton – US$/bbl |
(21.00) |
(23.79) |
(14.38) |
(17.37) |
(27.63) |
(29.14) |
(22.80) |
(14.25) |
AWB – Edmonton – US$/bbl |
55.96 |
54.53 |
67.88 |
56.41 |
48.50 |
53.51 |
68.75 |
94.16 |
Differential – WTI:AWB – USGC – US$/bbl |
(8.16) |
(7.43) |
(4.94) |
(7.62) |
(14.87) |
(16.35) |
(10.15) |
(6.15) |
AWB – USGC – US$/bbl |
68.80 |
70.89 |
77.32 |
66.16 |
61.26 |
66.30 |
81.40 |
102.26 |
Financial results: |
||||||||
Bitumen realization after net transportation and storage expense(1) – $/bbl |
60.10 |
63.52 |
84.75 |
57.64 |
43.40 |
54.75 |
74.75 |
103.29 |
Non-energy operating costs(2) – $/bbl |
5.18 |
4.64 |
5.15 |
5.66 |
4.77 |
4.34 |
4.49 |
5.65 |
Energy operating costs net of power revenue(1) – $/bbl |
1.19 |
1.46 |
(0.04) |
0.97 |
1.36 |
1.49 |
0.96 |
7.32 |
Operating expenses net of power revenue(1) – $/bbl |
6.37 |
6.10 |
5.11 |
6.63 |
6.13 |
5.83 |
5.45 |
12.97 |
Cash operating netback(1) – $/bbl |
39.99 |
38.65 |
58.64 |
42.38 |
34.32 |
43.89 |
62.63 |
81.75 |
General & administrative expense – $/bbl of bitumen production volumes |
2.18 |
1.89 |
1.73 |
1.85 |
1.94 |
1.62 |
1.72 |
2.37 |
Funds flow from operating activities |
329 |
358 |
492 |
278 |
348 |
383 |
501 |
412 |
Per share, diluted |
1.19 |
1.27 |
1.71 |
0.96 |
1.19 |
1.28 |
1.63 |
1.31 |
Adjusted funds flow(3) |
329 |
358 |
492 |
278 |
274 |
401 |
496 |
478 |
Per share, diluted(3) |
1.19 |
1.27 |
1.71 |
0.96 |
0.94 |
1.34 |
1.61 |
1.52 |
Capital expenditures |
112 |
104 |
83 |
149 |
113 |
106 |
78 |
104 |
Free cash flow(3) |
217 |
254 |
409 |
129 |
161 |
295 |
418 |
374 |
Debt repayments – US$ |
105 |
128 |
68 |
40 |
86 |
150 |
262 |
379 |
Share repurchases – C$ |
127 |
219 |
58 |
66 |
103 |
196 |
92 |
94 |
Revenues |
1,364 |
1,444 |
1,438 |
1,291 |
1,480 |
1,445 |
1,571 |
1,571 |
Net earnings (loss) |
98 |
103 |
249 |
136 |
81 |
159 |
156 |
225 |
Per share, diluted |
0.36 |
0.37 |
0.86 |
0.47 |
0.28 |
0.53 |
0.51 |
0.72 |
Long-term debt, including current portion |
1,015 |
1,124 |
1,323 |
1,382 |
1,466 |
1,581 |
1,803 |
2,026 |
Net debt(3) – US$ |
687 |
730 |
885 |
994 |
1,020 |
1,026 |
1,193 |
1,384 |
(1)Non-GAAP financial measure – please refer to the Advisory section of this news release.
(2)Supplementary financial measure – please refer to the Advisory section of this news release.
(3)Capital management measure – please refer to the Advisory section of this news release.
AFF increased to $329 million, or $1.19 per share, in the first quarter of 2024 from $274 million, or $0.94 per share, in the comparable 2023 period driven mainly by a higher cash operating netback and a lower interest expense. Cash operating netback rose $5.67 per barrel in the first quarter of 2024, mainly reflecting a higher bitumen realization after net transportation and storage expense partially offset by higher royalties.
Bitumen realization after net transportation and storage expense rose to $60.10 per barrel in the first quarter of 2024, from $43.40 per barrel in the same period of 2023, primarily driven by narrower WTI:AWB differentials, at both Edmonton and the U.S. Gulf Coast (“USGC”), which increased the blend sales price and lowered diluent expense.
Higher apportionment levels in the first quarter of 2024 reduced sales volumes in the more favorable USGC market. The Corporation sold 48% and 56% of blend sales volumes in the USGC during the first quarters of 2024 and 2023, respectively, with average heavy oil apportionment on the Enbridge mainline system rising to 28% in the first quarter of 2024 from 12% in the comparative 2023 period.
FCF increased to $217 million in first quarter of 2024, from $161 million in the comparable 2023 quarter, primarily reflecting higher AFF.
Capital expenditures of $112 million during the first quarter of 2024 were in line with the same period of 2023 with spending primarily focused on sustaining and maintenance activities in both periods.
Net earnings increased to $98 million in the first quarter of 2024 from $81 million in the same period of 2023 mainly driven by higher AFF partially offset by an unrealized foreign exchange loss on long-term debt, higher depletion and depreciation and increased deferred tax expense.
Bitumen production in the first quarter of 2024 declined 3% to 104,088 bbls/d at a 2.37 SOR from 106,840 bbls/d at a 2.25 SOR in the comparable 2023 period reflecting cold weather impacts, facility maintenance activities and timing of new well start-ups.
Non‐energy operating costs averaged $5.18 per barrel of bitumen sales in the first quarter of 2024 representing a 9% increase from the same quarter of 2023 primarily reflecting planned labour cost increases and higher well workover activity.
Energy operating costs net of power revenue decreased to $1.19 per barrel in the first quarter of 2024 from $1.36 per barrel in the comparable 2023 period primarily reflecting a weaker AECO natural gas price partially offset by a decline in the realized power price. Revenue from the sale of excess power generated by the Corporation’s cogeneration facilities offset 68% and 76% of energy operating costs in the first quarters of 2024 and 2023, respectively.
The $217 million of first quarter 2024 FCF, plus available cash, was used to redeem debt and return capital to shareholders. The Corporation redeemed US$105 million (approximately $142 million) of outstanding 7.125% senior unsecured notes at a redemption price of 101.8% and returned $127 million to MEG shareholders through the repurchase and cancellation of 4.7 million shares at a weighted average price of $26.94 per share.
IBF4