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, Nov. 6, 2023 /CNW/ - MEG Energy Corp.
(TSX: MEG) ("MEG" or the "Corporation") reported its third quarter
2023 operational and financial results.
"Increased bitumen production and strong bitumen realizations
resulted in over $400 million of free
cash flow in the quarter allowing us to advance our debt reduction
and return of capital strategy while continuing to deliver safe and
reliable operations," said Derek
Evans Chief Executive Officer. "At current oil prices we
expect to reach our US$600 million
net debt target in mid-2024, at which point our return of capital
to shareholders will rise from 50% to 100% of free cash flow, and
at the same time, we will be well-positioned to sanction highly
economic projects for modest production growth over the next few
years. MEG's financial turnaround and current business strength has
been governed by the Board of Directors led over the last few years
by Ian Bruce as Chair. His business
insight, support and kindness will be greatly missed."
Third quarter 2023 highlights include:
- Funds flow from operating activities ("FFO") and adjusted funds
flow ("AFF") of $492 million, or
$1.71 per share. Year-to-date FFO and
AFF totaled $1,118 million and
$1,044 million, or $3.85 and $3.60 per
share, respectively;
- Bitumen production of 103,726 barrels per day ("bbls/d") at a
2.28 steam-oil ratio ("SOR") reflecting the Corporation's continued
focus on short-cycle redevelopment programs, enhanced completion
designs and optimized well spacing. Year-to-date bitumen production
averaged 98,835 bbls/d;
- Bitumen realization after net transportation and storage
expense of $84.75 per barrel
reflecting the Corporation's strategic market access together with
supportive supply/demand fundamentals for its Access Western Blend
("AWB") product. Bitumen realization after net transportation and
storage expense in the first nine months of 2023 was $62.04 per barrel;
- Free cash flow ("FCF") of $409
million after $83 million of
capital expenditures. Year-to-date FCF totaled $699 million after $345
million of capital expenditures;
- Debt repayment of US$68 million
(approximately $92 million) during
the third quarter of 2023 and US$194
million (approximately $263
million) year-to-date. Net debt declined to US$885 million (approximately $1.2 billion) at the end of the third quarter of
2023;
- MEG returned $58 million to
shareholders during the third quarter of 2023 through the buyback
and cancellation of 2.3 million shares at a weighted average price
of $25.40 per share. Year-to-date
buybacks totaled 10.3 million shares, returning $227 million to shareholders;
- Operating expenses net of power revenue of $5.11 per barrel. Power revenue more than offset
energy operating costs, resulting in a recovery of energy operating
costs net of power revenue of $0.04
per barrel and non-energy operating costs of $5.15 per barrel. Year-to-date operating expenses
net of power revenue were $5.91 per
barrel, including non-energy operating costs of $5.16 per barrel and $0.75 per barrel of energy operating costs net of
power revenue;
- The Corporation published its third ESG report in September 2023, which discusses its foundational
commitments of Business Model Resilience and Governance and the
Corporation's priority ESG topics: Health and Safety; Climate
Change and GHG Emissions; Water Management; Energy Security; Energy
Affordability; and Indigenous Relations; and
- On September 13, 2023, Fitch
Ratings raised the Corporation's long-term issuer credit rating to
BB- with a stable outlook from B+ and affirmed the issue-level
rating on the Corporation's senior unsecured notes at BB-.
|
Nine months
ended Sept 30
|
2023
|
2022
|
2021
|
($millions, except
as indicated)
|
2023
|
2022
|
Q3
|
Q2
|
Q1
|
Q4
|
Q3
|
Q2
|
Q1
|
Q4
|
Bitumen production -
bbls/d
|
98,835
|
90,126
|
103,726
|
85,974
|
106,840
|
110,805
|
101,983
|
67,256
|
101,128
|
100,698
|
|
|
|
|
|
|
|
|
|
|
|
Steam-oil
ratio
|
2.26
|
2.42
|
2.28
|
2.25
|
2.25
|
2.22
|
2.39
|
2.46
|
2.43
|
2.42
|
|
|
|
|
|
|
|
|
|
|
|
Bitumen sales -
bbls/d
|
97,194
|
89,662
|
101,625
|
83,531
|
106,480
|
113,582
|
95,759
|
73,091
|
100,186
|
98,894
|
|
|
|
|
|
|
|
|
|
|
|
Bitumen realization
after net transportation
and storage
expense(1) - $/bbl
|
62.04
|
86.02
|
84.75
|
57.64
|
43.40
|
54.75
|
74.75
|
103.29
|
84.31
|
59.67
|
|
|
|
|
|
|
|
|
|
|
|
Non-energy operating
costs(2) - $/bbl
|
5.16
|
4.90
|
5.15
|
5.66
|
4.77
|
4.34
|
4.49
|
5.65
|
4.74
|
4.56
|
Energy operating costs
net of power
revenue(1) -
$/bbl
|
0.75
|
3.89
|
(0.04)
|
0.97
|
1.36
|
1.49
|
0.96
|
7.32
|
4.24
|
3.64
|
|
|
|
|
|
|
|
|
|
|
|
Cash operating
netback(1) - $/bbl
|
45.19
|
70.61
|
58.64
|
42.38
|
34.32
|
43.89
|
62.63
|
81.75
|
70.21
|
37.87
|
|
|
|
|
|
|
|
|
|
|
|
General &
administrative expense -
$/bbl of bitumen production
volumes
|
1.84
|
1.84
|
1.73
|
1.85
|
1.94
|
1.62
|
1.72
|
2.37
|
1.61
|
1.58
|
|
|
|
|
|
|
|
|
|
|
|
Funds flow from
operating activities
|
1,118
|
1,500
|
492
|
278
|
348
|
383
|
501
|
412
|
587
|
260
|
Per share,
diluted
|
3.85
|
4.80
|
1.71
|
0.96
|
1.19
|
1.28
|
1.63
|
1.31
|
1.87
|
0.83
|
Adjusted funds
flow(3)
|
1,044
|
1,533
|
492
|
278
|
274
|
401
|
496
|
478
|
559
|
274
|
Per share,
diluted(3)
|
3.60
|
4.91
|
1.71
|
0.96
|
0.94
|
1.34
|
1.61
|
1.52
|
1.78
|
0.88
|
Free cash
flow(3)
|
699
|
1,263
|
409
|
129
|
161
|
295
|
418
|
374
|
471
|
168
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
4,209
|
4,673
|
1,438
|
1,291
|
1,480
|
1,445
|
1,571
|
1,571
|
1,531
|
1,307
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
(loss)
|
466
|
743
|
249
|
136
|
81
|
159
|
156
|
225
|
362
|
177
|
Per share,
diluted
|
1.61
|
2.38
|
0.86
|
0.47
|
0.28
|
0.53
|
0.51
|
0.72
|
1.15
|
0.57
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
345
|
270
|
83
|
149
|
113
|
106
|
78
|
104
|
88
|
106
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt,
including current portion
|
1,323
|
1,803
|
1,323
|
1,382
|
1,466
|
1,581
|
1,803
|
2,026
|
2,440
|
2,762
|
Net debt(3)
- C$
|
1,198
|
1,634
|
1,198
|
1,316
|
1,381
|
1,389
|
1,634
|
1,782
|
2,150
|
2,401
|
Net debt(3)
- US$
|
885
|
1,193
|
885
|
994
|
1,020
|
1,026
|
1,193
|
1,384
|
1,722
|
1,897
|
(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.
|
Financial Results
AFF and FFO in the third quarter of 2023 decreased to
$492 million from $496 million and $501
million, respectively, in the comparative 2022 period.
Increased sales volumes due to higher bitumen production largely
offset a 6% decline in cash operating netback, to $58.64 per barrel, reflecting a higher bitumen
realization after net transportation and storage expense more than
offset by increased post-payout royalties.
Third quarter 2023 bitumen realization after net transportation
and storage expense rose to $84.75
from $74.75 per barrel in the same
period of 2022. A lower WTI oil price was more than offset by
narrower WTI:AWB differentials and a weaker Canadian dollar. In
addition, diluent expense fell from $9.63 to $0.06 per
barrel reflecting a lower purchase cost of diluent relative to WTI,
narrower WTI:AWB differentials and use of diluent linefill recorded
at a lower historical accounting value. Diluent costs were fully
recovered through blend sales in the third quarter of 2023 compared
to a 79% recovery in the same 2022 period.
The Corporation's Christina
Lake operation reached post-payout status under the Oil
Sands Royalty Regulation in the second quarter of 2023. The
resulting royalty rate increase raised third quarter 2023 royalties
to $181 million from $66 million in the same period of 2022.
The Corporation sold 73% and 66% of blend sales volumes in the
USGC market during the third quarters of 2023 and 2022,
respectively. Average heavy oil apportionment on the Enbridge
mainline system was 1% and 3% in those periods.
Third quarter 2023 FCF was $409
million, compared to $418
million in the same period of 2022, reflecting lower AFF and
an increase in capital spending.
Capital expenditures rose to $83
million in the third quarter of 2023 from $78 million in the same quarter of 2022 due to
increased 2023 scope, inflation and timing of field development and
maintenance activities.
Net earnings increased to $249
million in the third quarter of 2023 from $156 million in the comparative 2022 period,
mainly reflecting a smaller unrealized foreign exchange loss on
long-term debt.
Operating Results
Bitumen production rose approximately 2% in the third quarter of
2023 to 103,726 bbls/d, from 101,983 bbls/d in the same period of
2022. Higher 2023 production was delivered at a 2.28 SOR, a 5%
reduction from 2.39 in the third quarter of 2022. This reflects the
Corporation's continued focus on short-cycle redevelopment
programs, enhanced completion designs, optimized well spacing and
targeted facility enhancements.
Third quarter 2023 non‐energy operating costs increased to
$5.15 per barrel of bitumen sales
from $4.49 per barrel during the same
period of 2022, primarily reflecting the timing of maintenance
activities and inflationary pressures on the cost of services,
treating chemicals and staff costs.
Power revenue exceeded energy operating costs in the third
quarter of 2023 generating a $0.04
per barrel net recovery relative to a $0.96 per barrel expense in the comparable 2022
period. Weaker natural gas prices reduced energy operating costs
more than the offsetting impact of a lower realized price on power
revenue. Power revenue offset 101% and 84% of energy operating
costs in the third quarters of 2023 and 2022, respectively.
Debt Repurchases and Share Buybacks
The $409 million of third quarter
2023 FCF was used to fund working capital requirements, repurchase
debt and buy back shares. The Corporation repurchased US$68 million (approximately $92 million) of outstanding 7.125% senior
unsecured notes at a weighted average price of 101.7%. Share
buybacks totaled $58 million through the repurchase and
cancellation of 2.3 million shares at a weighted average price
of $25.40 per share. Year-to-date the
Corporation repurchased US$194
million (approximately $263
million) of outstanding 7.125% senior unsecured notes at a
weighted average price of 102.1%, and share buybacks totaled
$227.4 million through the
repurchase and cancellation of 10.3 million shares at a
weighted average price of $22.07 per
share.
The Corporation remains focused on its strategy of debt
reduction and returning capital to shareholders. From April 1, 2022 through November 3, 2023, 33.1 million shares have been
repurchased and cancelled returning $668
million to shareholders at a weighted average price of
$20.16 per share. Debt repurchases
have totaled US$853 million
(approximately $1.1 billion) over
that same period.
Capital Allocation Strategy
Approximately 50% of 2023 FCF is being allocated to debt
reduction with the remainder applied to share buybacks. 100% of FCF
will be returned to shareholders when the Corporation reaches its
US$600 million net debt target, which
is expected to occur mid-2024 at current oil prices. The
Corporation exited the third quarter of 2023 with net debt of
US$885 million.
Sustainability and Pathways Update
The Corporation published its third ESG report in September 2023, which discusses its foundational
commitments of Business Model Resilience and Governance and the
Corporation's priority ESG topics: Health and Safety; Climate
Change and GHG Emissions; Water Management; Energy Security; Energy
Affordability; and Indigenous Relations. The ESG report illustrates
progress in several areas in 2022 and early 2023, including the
establishment of a new mid-term absolute GHG emissions reduction
target of 0.63 megatonnes per annum by year-end 2030 (an
approximately 30% reduction from 2019 levels); $72 million spent on goods and services provided
by Indigenous businesses in 2022 (a 30% increase over 2021);
launching our Diversity, Equity and Inclusion education and
awareness campaign focused on amplifying the voices of every team
member to enhance our decision making, innovation, employee
engagement and the Corporation's long-term success; and the
continued advancement of safety management programs and systems to
ensure safe, sustainable and reliable operations.
MEG, along with its Pathways Alliance ("Alliance") peers,
continues to progress pre-work on the proposed foundational carbon
capture and storage ("CCS") project, which will transport CO2 via
pipeline from multiple oil sands facilities to be stored safely and
permanently underground in the Cold
Lake region of Alberta.
During the third quarter of 2023, technical teams continued to
advance detailed evaluations of the proposed carbon storage hub.
The Alliance is working to obtain a carbon sequestration agreement
from the Government of Alberta by
year-end 2023 to support regulatory submissions. In addition, the
Alliance continued to advance engineering work, environmental field
programs to minimize the project's environmental disturbance, and
consultations with Indigenous and local communities along the
proposed CO2 transportation and storage network corridor. The
Alliance continues to work collaboratively with both the federal
and Alberta governments on the
necessary policy and co-financing frameworks required to move the
project forward. The federal government has proposed an investment
tax credit ("ITC") for CCS projects for all sectors across
Canada. Updated draft legislation
was released for consultation in the third quarter of 2023. It will
be important for governments to work together with industry to
ensure that the ITC implementation delivers required support to
enable CCS project development.
For further details on the 2023 ESG Report and on the
Corporation's approach to ESG matters, please refer to the
"Sustainability" section of the Corporation's website at
www.megenergy.com and the most recently filed AIF
on www.sedarplus.ca.
Outlook
The 2023 guidance remains unchanged. Forecast bitumen production
for the second half of the year is unchanged at approximately
105,000 bbls/d, with annual production still trending towards the
low end of the guidance range and non-energy operating costs and
G&A expense still trending towards the high end of their
respective ranges.
The Corporation has capacity to ship 100,000 bbls/d of AWB blend
sales, on a pre-apportionment basis, to the USGC market via its
committed FSP capacity. In addition, 20,000 bbls/d of capacity is
contracted on the TMX pipeline system to Canada's West Coast. TMX is scheduled to come
into service at the end of the first quarter of 2024, which will
further broaden MEG's market access.
Summary of 2023
Guidance
|
|
|
Capital
expenditures
|
|
$450 million
|
Bitumen production -
annual average(1)
|
|
100,000 - 105,000
bbls/d
|
Non-energy operating
costs
|
|
$4.75 - $5.05 per
bbl
|
G&A
expense
|
|
$1.70 - $1.90 per
bbl
|
(1)
2023 guidance includes the bitumen production impact of the
second quarter turnaround which impacted annual average bitumen
production by approximately 6,000 bbls/d.
|
Adjusted Funds Flow Sensitivity
MEG's production is comprised entirely of crude oil and AFF is
highly correlated with crude oil benchmark prices and light-heavy
oil differentials. The following table provides an annual
sensitivity estimate to the most significant market variables.
Variable
|
Range
|
2023 AFF
Sensitivity(1)(2) - C$mm
|
WCS Differential
(US$/bbl)
|
+/-
US$1.00/bbl
|
+/- C$45mm
|
WTI
(US$/bbl)
|
+/-
US$1.00/bbl
|
+/- C$27mm
|
Bitumen Production
(bbls/d)
|
+/- 1,000
bbls/d
|
+/- C$17mm
|
Condensate
(US$/bbl)
|
+/-
US$1.00/bbl
|
+/- C$14mm
|
Exchange Rate
(C$/US$)
|
+/- $0.01
|
+/- C$9mm
|
Non-Energy Opex
(C$/bbl)
|
+/-
C$0.25/bbl
|
+/- C$6mm
|
AECO Gas(3)
(C$/GJ)
|
+/-
C$0.50/GJ
|
+/- C$2mm
|
(1)
|
Each sensitivity is
independent of changes to other variables.
|
(2)
|
Assumes low end of
2023 production guidance, US$80.00/bbl WTI, US$18.50/bbl WTI:AWB
Edmonton discount, US$9.00/bbl WTI:AWB Gulf Coast discount,
C$1.32/US$ F/X rate, condensate purchased at 100% of WTI and one
bbl of bitumen per 1.44 bbls of blend sales (1.44 blend
ratio).
|
(3)
|
Assumes 1.3 GJ/bbl
of bitumen, 70% of 150 MW of power generation sold externally and a
30.0 GJ/MWh heat rate.
|
Conference Call
A conference call will be held to review MEG's third quarter
2023 operating and financial results at 6:30
a.m. Mountain Time (8:30 a.m. Eastern
Time) on November 7, 2023. To
participate, please dial the North American toll-free number
1-888-390-0546, or the international call number
1-416-764-8688.
A recording of the call will be available by 12 p.m. Mountain Time (2
p.m. Eastern Time) on the same day at
www.megenergy.com/investors/presentations-events/.
ADVISORY
Basis of Presentation
MEG prepares its financial statements in accordance with
International Financial Reporting Standards ("IFRS") and presents
financial results in Canadian dollars ($ or C$), which is the
Corporation's functional currency.
Non-GAAP and Other Financial Measures
Certain financial measures in this news release are non-GAAP
financial measures or ratios, supplementary financial measures and
capital management measures. These measures are not defined by IFRS
and, therefore, may not be comparable to similar measures provided
by other companies. These non-GAAP and other financial measures
should not be considered in isolation or as an alternative for
measures of performance prepared in accordance with IFRS.
Adjusted Funds Flow and Free Cash Flow
Adjusted funds flow and free cash flow are capital management
measures and are defined in the Corporation's consolidated
financial statements. Adjusted funds flow and free cash flow are
presented to assist management and investors in analyzing operating
performance and cash flow generating ability. Funds flow from
operating activities is an IFRS measure in the Corporation's
consolidated statement of cash flow. Adjusted funds flow is
calculated as funds flow from operating activities excluding items
not considered part of ordinary continuing operating results. By
excluding non-recurring adjustments, the adjusted funds flow
measure provides a meaningful metric for management and investors
by establishing a clear link between the Corporation's cash flows
and cash operating netback. Free cash flow is presented to assist
management and investors in analyzing performance by the
Corporation as a measure of financial liquidity and the capacity of
the business to repay debt and return capital to shareholders. Free
cash flow is calculated as adjusted funds flow less capital
expenditures.
In the second quarter of 2022, an adjustment was made to the
presentation of adjusted funds flow and free cash flow. In
April 2020, the Corporation issued
cash-settled RSUs under its long-term incentive ("LTI") plan when
the share price was at a historic low of $1.57 per share. Concurrent with the issuance,
the Corporation entered equity price risk management contracts to
manage share price volatility in the subsequent three-year period,
effectively reducing share price appreciation cash flow risk. The
increase in the Corporation's share price from April 2020 to June 30,
2022 resulted in the recognition of a significant
cash-settled stock-based compensation expense, which was previously
included as a component of adjusted funds flow and free cash flow.
The actual cash impact of the 2020 cash-settled RSUs, however, was
subject to equity price risk management contracts, so the cash
impact over the term of these RSUs was reduced and the change in
value did not provide a valuable indication of operating
performance.
Therefore, the financial statement impacts of the April 2020 cash-settled stock-based compensation
and the equity price risk management contracts were excluded from
adjusted funds flow and free cash flow. All prior periods presented
have been adjusted to reflect this change in presentation.
The following table reconciles FFO to AFF to FCF:
|
Three months
ended
September 30
|
Nine months
ended
September 30
|
($millions)
|
2023
|
2022
|
2023
|
2022
|
Funds flow from
operating activities
|
$
492
|
$
501
|
$
1,118
|
$
1,500
|
Adjustments:
|
|
|
|
|
Impact of cash-settled
SBC units subject to equity price risk management
|
—
|
(5)
|
13
|
79
|
Realized equity price
risk management gain
|
—
|
—
|
(87)
|
(46)
|
Adjusted funds
flow
|
492
|
496
|
1,044
|
1,533
|
Capital
expenditures
|
(83)
|
(78)
|
(345)
|
(270)
|
Free cash
flow
|
$
409
|
$
418
|
$
699
|
$
1,263
|
Net Debt
Net debt is a capital management measure and is defined in the
Corporation's consolidated financial statements. Net debt is an
important measure used by management to analyze leverage and
liquidity. Net debt is calculated as long-term debt plus current
portion of long-term debt less cash and cash equivalents.
The following table reconciles the Corporation's current and
long-term debt to net debt:
As at
|
September 30,
2023
|
December 31,
2022
|
Long-term
debt
|
$
1,323
|
$
1,578
|
Current portion of
long-term debt
|
—
|
3
|
Cash and cash
equivalents
|
(125)
|
(192)
|
Net debt -
C$
|
$
1,198
|
$
1,389
|
Net debt -
US$
|
$
885
|
$
1,026
|
Cash Operating Netback
Cash operating netback is a non-GAAP financial measure, or ratio
when expressed on a per barrel basis. Its terms are not defined by
IFRS and, therefore, may not be comparable to similar measures
provided by other companies. This non-GAAP financial measure should
not be considered in isolation or as an alternative for measures of
performance prepared in accordance with IFRS.
Cash operating netback is a financial measure widely used in the
oil and gas industry as a supplemental measure of a company's
efficiency and its ability to generate cash flow for debt
repayment, capital expenditures, or other uses. The per barrel
calculation of cash operating netback is based on bitumen sales
volumes.
Revenues is an IFRS measure in the Corporation's consolidated
statement of earnings (loss) and comprehensive income (loss) which
is the most directly comparable primary financial statement measure
to cash operating netback. A reconciliation from revenues to cash
operating netback has been provided below:
|
Three months
ended
September 30
|
Nine months
ended
September 30
|
($millions)
|
2023
|
2022
|
2023
|
2022
|
Revenues
|
$
1,438
|
$
1,571
|
$
4,209
|
$
4,673
|
Diluent
expense
|
(359)
|
(411)
|
(1,220)
|
(1,343)
|
Transportation and
storage expense
|
(157)
|
(138)
|
(452)
|
(387)
|
Purchased
product
|
(279)
|
(383)
|
(1,066)
|
(919)
|
Operating
expenses
|
(80)
|
(94)
|
(252)
|
(305)
|
Realized gain (loss) on
commodity risk management
|
(14)
|
7
|
(19)
|
9
|
Cash operating
netback
|
$
549
|
$
552
|
$
1,200
|
$
1,728
|
Blend Sales and Bitumen Realization
Blend sales and bitumen realization are non-GAAP financial
measures, or ratios when expressed on a per barrel basis, and are
used as a measure of the Corporation's marketing strategy by
isolating petroleum revenue and costs associated with its produced
and purchased products and excludes royalties. Their terms are not
defined by IFRS and, therefore, may not be comparable to similar
measures provided by other companies. These non-GAAP financial
measures should not be considered in isolation or as an alternative
for measures of performance prepared in accordance with IFRS. Blend
sales per barrel is based on blend sales volumes and bitumen
realization per barrel is based on bitumen sales volumes.
Revenues is an IFRS measure in the Corporation's consolidated
statement of earnings (loss) and comprehensive income (loss), which
is the most directly comparable primary financial statement measure
to blend sales and bitumen realization. A reconciliation from
revenues to blend sales and bitumen realization has been provided
below:
|
Three months ended
September 30
|
Nine months ended
September 30
|
|
2023
|
2022
|
2023
|
2022
|
($millions, except
as indicated)
|
|
$/bbl
|
|
$/bbl
|
|
$/bbl
|
|
$/bbl
|
Revenues
|
$
1,438
|
|
$
1,571
|
|
$
4,209
|
|
$
4,673
|
|
Power and
transportation revenue
|
(33)
|
|
(47)
|
|
(98)
|
|
(93)
|
|
Royalties
|
181
|
|
66
|
|
270
|
|
171
|
|
Petroleum
revenue
|
1,586
|
|
1,590
|
|
4,381
|
|
4,751
|
|
Purchased
product
|
(279)
|
|
(383)
|
|
(1,066)
|
|
(919)
|
|
Blend sales
|
1,307
|
$
101.53
|
1,207
|
$
99.96
|
3,315
|
$
88.18
|
3,832
|
$ 109.94
|
Diluent
expense
|
(359)
|
(0.06)
|
(411)
|
(9.63)
|
(1,220)
|
(9.20)
|
(1,343)
|
(8.26)
|
Bitumen
realization
|
$ 948
|
$
101.47
|
$ 796
|
$
90.33
|
$
2,095
|
$
78.98
|
$
2,489
|
$ 101.68
|
Net Transportation and Storage Expense
Net transportation and storage expense is a non-GAAP financial
measure, or ratio when expressed on a per barrel basis. Its terms
are not defined by IFRS and therefore may not be comparable to
similar measures provided by other companies. This non-GAAP
financial measure should not be considered in isolation or as an
alternative for measures of performance prepared in accordance with
IFRS. Per barrel amounts are based on bitumen sales volumes.
It is used as a measure of the Corporation's marketing strategy
by focusing on maximizing the realized AWB sales price after
transportation and storage expense by utilizing its network of
pipeline and storage facilities to optimize market access.
Transportation and storage expense is an IFRS measure in the
Corporation's consolidated statements of earnings (loss) and
comprehensive income (loss).
Power and transportation revenue is an IFRS measure in the
Corporation's consolidated statement of earnings (loss) and
comprehensive income (loss), which is the most directly comparable
primary financial statement measure to transportation revenue. A
reconciliation from power and transportation revenue to
transportation revenue has been provided below.
|
Three months ended
September 30
|
Nine months ended
September 30
|
|
2023
|
2022
|
2023
|
2022
|
($millions, except
as indicated)
|
|
$/bbl
|
|
$/bbl
|
|
$/bbl
|
|
$/bbl
|
Transportation and
storage expense
|
$
(157)
|
$
(16.83)
|
$
(138)
|
$
(15.70)
|
$
(452)
|
$
(17.04)
|
$
(387)
|
$
(15.80)
|
|
|
|
|
|
|
|
|
|
Power and
transportation revenue
|
$
33
|
|
$ 47
|
|
$
98
|
|
$ 93
|
|
Less power
revenue
|
(32)
|
|
(46)
|
|
(95)
|
|
(90)
|
|
Transportation
revenue
|
$
1
|
$
0.11
|
$
1
|
$
0.12
|
$
3
|
$
0.10
|
$
3
|
$
0.14
|
|
|
|
|
|
|
|
|
|
Net transportation and
storage expense
|
$
(156)
|
$
(16.72)
|
$
(137)
|
$
(15.58)
|
$
(449)
|
$
(16.94)
|
$
(384)
|
$
(15.66)
|
Bitumen Realization after Net Transportation and Storage
Expense
Bitumen realization after net transportation and storage expense
is a non-GAAP financial measure, or ratio when expressed on a per
barrel basis. Its terms are not defined by IFRS and, therefore may
not be comparable to similar measures provided by other companies.
This non-GAAP financial measure should not be considered in
isolation or as an alternative for measures of performance prepared
in accordance with IFRS. Per barrel amounts are based on bitumen
sales volumes.
It is used as a measure of the Corporation's marketing strategy
by focusing on maximizing the realized bitumen sales price after
net transportation and storage expense by utilizing its network of
pipeline and storage facilities to optimize market access.
|
Three months ended
September 30
|
Nine months ended
September 30
|
|
2023
|
2022
|
2023
|
2022
|
($millions, except
as indicated)
|
|
$/bbl
|
|
$/bbl
|
|
$/bbl
|
|
$/bbl
|
Bitumen
realization(1)
|
$ 948
|
$
101.47
|
$ 796
|
$
90.33
|
$
2,095
|
$
78.98
|
$
2,489
|
$
101.68
|
Net transportation and
storage
expense(1)
|
(156)
|
(16.72)
|
(137)
|
(15.58)
|
(449)
|
(16.94)
|
(384)
|
(15.66)
|
Bitumen realization
after net
transportation and storage
expense
|
$ 792
|
$
84.75
|
$ 659
|
$
74.75
|
$
1,646
|
$
62.04
|
$
2,105
|
$
86.02
|
(1)
Non-GAAP financial measure as defined in this
section.
|
Operating Expenses net of Power Revenue and Energy Operating
Costs net of Power Revenue
Operating expenses net of power revenue and Energy operating
costs net of power revenue are both non-GAAP financial measures, or
ratios when expressed on a per barrel basis. Their terms are not
defined by IFRS and therefore may not be comparable to similar
measures provided by other companies. These non-GAAP financial
measures should not be considered in isolation or as an alternative
for measures of performance prepared in accordance with IFRS. Per
barrel amounts are based on bitumen sales volumes.
Operating expenses net of power revenue is used as a measure of
the Corporation's cost to operate its facilities at the
Christina Lake project after
factoring in the benefits from selling excess power to offset
energy costs.
Energy operating costs net of power revenue is used to measure
the performance of the Corporation's cogeneration facilities to
offset energy operating costs.
Non-energy operating costs and energy operating costs are
supplementary financial measures as they represent portions of
operating expenses. Non-energy operating costs comprise
production-related operating activities and energy operating costs
reflect the cost of natural gas used as fuel to generate steam and
power. Per barrel amounts are based on bitumen sales volumes.
Operating expenses is an IFRS measure in the Corporation's
consolidated statement of earnings (loss) and comprehensive income
(loss). Power and transportation revenue is an IFRS measure in the
Corporation's consolidated statement of earnings (loss) and
comprehensive income (loss) which is the most directly comparable
primary financial statement measure to power revenue. A
reconciliation from power and transportation revenue to power
revenue has been provided below.
|
Three months ended
September 30
|
Nine months ended
September 30
|
|
2023
|
2022
|
2023
|
2022
|
($millions, except
as indicated)
|
|
$/bbl
|
|
$/bbl
|
|
$/bbl
|
|
$/bbl
|
Non-energy operating
costs
|
$ (48)
|
$
(5.15)
|
$
(40)
|
$
(4.49)
|
$
(137)
|
$
(5.16)
|
$
(120)
|
$
(4.90)
|
Energy operating
costs
|
(32)
|
(3.42)
|
(54)
|
(6.12)
|
(115)
|
(4.34)
|
(185)
|
(7.53)
|
Operating
expenses
|
$ (80)
|
$
(8.57)
|
$
(94)
|
$
(10.61)
|
$
(252)
|
$
(9.50)
|
$
(305)
|
$
(12.43)
|
|
|
|
|
|
|
|
|
|
Power and
transportation revenue
|
$
33
|
|
$ 47
|
|
$
98
|
|
$ 93
|
|
Less transportation
revenue
|
(1)
|
|
(1)
|
|
(3)
|
|
(3)
|
|
Power
revenue
|
$
32
|
$
3.46
|
$ 46
|
$
5.16
|
$
95
|
$
3.59
|
$ 90
|
$
3.64
|
|
|
|
|
|
|
|
|
|
Operating expenses net
of power revenue
|
$ (48)
|
$
(5.11)
|
$ (48)
|
$
(5.45)
|
$
(157)
|
$
(5.91)
|
$
(215)
|
$
(8.79)
|
|
|
|
|
|
|
|
|
|
Energy operating costs
net of power
revenue
|
$
—
|
$
0.04
|
$ (8)
|
$
(0.96)
|
$ (20)
|
$
(0.75)
|
$ (95)
|
$
(3.89)
|
Forward-Looking Information
Certain statements contained in this news release may constitute
forward-looking statements within the meaning of applicable
Canadian securities laws. These statements relate to future events
or MEG's future performance. All statements other than statements
of historical fact may be forward-looking statements. The use of
any of the words "anticipate", "continue", "estimate", "expect",
"may", "will", "project", "should", "believe", "plan", "intend",
"target", "potential" and similar expressions are intended to
identify forward-looking statements.
Forward-looking statements are often, but not always, identified
by such words. These statements involve known and unknown risks,
uncertainties and other factors that may cause actual results or
events to differ materially from those anticipated in such
forward-looking statements. In particular, and without limiting the
foregoing, this press release contains forward looking statements
with respect to: the Corporation's expectation of reaching its
US$600 million debt target in
mid-2024; the Corporation's expectation of returning 100% of free
cash flow to shareholders and being positioned to sanction highly
economic projects for modest production growth over the next few
years; the Corporation's focus on short-cycle redevelopment
programs, enhanced completion designs, optimized well spacing and
target facility enhancements and the impact of these activities on
the Corporation's steam-oil ratio; the Corporation's expectation of
allocating 50% of free cash flow to share buybacks with the
remaining cash flow applied to ongoing debt reduction until it
reaches its net debt floor of US$600
million; all statements relating to the Corporation's 2023
guidance, including forecast second half production and non-energy
operating costs and general and administration costs; the
Corporation's expectation that the TMX pipeline system will come
into service at the end of the first quarter of 2024; the
Corporation's expectations regarding the Pathways Alliance projects
and government support of these projects; and the Corporation's
adjusted funds flow sensitivity estimates.
Forward-looking information contained in this press release is
based on management's expectations and assumptions regarding, among
other things: future crude oil, bitumen blend, natural gas,
electricity, condensate and other diluent prices, differentials,
the level of apportionment on the Enbridge Mainline system, foreign
exchange rates and interest rates; the recoverability of MEG's
reserves and contingent resources; MEG's ability to produce and
market production of bitumen blend successfully to customers;
future growth, results of operations and production levels; future
capital and other expenditures; revenues, expenses and cash flow;
operating costs; reliability; continued liquidity and runway to
sustain operations through a prolonged market downturn; MEG's
ability to reduce or increase production to desired levels,
including without negative impacts to its assets; anticipated
reductions in operating costs as a result of optimization and
scalability of certain operations; anticipated sources of funding
for operations and capital investments; plans for and results of
drilling activity; the regulatory framework governing royalties,
land use, taxes and environmental matters, including the timing and
level of government production curtailment and federal and
provincial climate change policies, in which MEG conducts and will
conduct its business; the availability of government support to
industry to assist in the achievement of net zero GHG emissions by
2050; the impact of MEG's response to the COVID-19 global pandemic;
and 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 and uncertainties include, but are not limited to,
risks and uncertainties related to: the oil and gas industry, for
example, the securing of adequate access to markets and
transportation infrastructure (including pipelines and rail) and
the commitments therein; the availability of capacity on the
electricity 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, including public health crises, such as the
COVID-19 pandemic, and any related actions taken by governments and
businesses; legislative and regulatory changes to, amongst other
things, tax, land use, royalty and environmental laws and
production curtailment; the cost of compliance with current and
future environmental laws, including climate change laws; risks
relating to increased activism and public opposition to fossil
fuels and oil sands; the inability to access government support to
industry to assist in the achievement of net zero GHG emissions by
2050; assumptions regarding and the volatility of commodity prices,
interest rates and foreign exchange rates; commodity price,
interest rate and foreign exchange rate swap contracts and/or
derivative financial instruments that MEG may enter into from time
to time to manage its risk related to such prices and rates; timing
of completion, commissioning, and start-up, of MEG's turnarounds;
the operational risks and delays in the development, exploration,
production, and the capacities and performance associated with
MEG's projects; MEG's ability to reduce or increase production to
desired levels, including without negative impacts to its assets;
MEG's ability to finance capital expenditures; MEG's ability to
maintain sufficient liquidity to sustain operations through a
prolonged market downturn; changes in credit ratings applicable to
MEG or any of its securities; the severity and duration of ongoing
consequences of the COVID-19 pandemic; actions taken by OPEC+ in
relation to supply management; the impact of the Russian invasion
of Ukraine and associated
sanctions on commodity prices; the availability and cost of labour
and goods and services required in the Corporation's operations,
including inflationary pressures; supply chain issues including
transportation delays; the cost and availability of equipment
necessary to our operations; and changes in general economic,
market and business conditions.
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.
Further information regarding the assumptions and risks inherent
in the making of forward-looking statements can be found in MEG's
most recently filed Annual Information Form ("AIF"), along with
MEG's other public disclosure documents. Copies of the AIF and
MEG's other public disclosure documents are available through the
Company's website at www.megenergy.com/investors and through
the SEDAR+ website at www.sedarplus.ca.
The forward-looking information included in this news release is
expressly qualified in its entirety by the foregoing cautionary
statements. Unless otherwise stated, the forward-looking
information included in this news release is made as of the date of
this news release and MEG assumes no obligation to update or revise
any forward-looking information to reflect new events or
circumstances, except as required by law.
This news release contains future-oriented financial information
and financial outlook information (collectively, "FOFI") about
MEG's prospective results of operations including, without
limitation, the Corporation's capital expenditures, production,
non-energy operating costs, general and administrative costs and
transportation costs, all of which are subject to the same
assumptions, risk factors, limitations, and qualifications as set
forth above. Readers are cautioned that the assumptions used in the
preparation of such information, although considered reasonable at
the time of preparation, may prove to be imprecise and, as such,
undue reliance should not be placed on FOFI. MEG's actual
results, performance or achievement could differ materially from
those expressed in, or implied by, these FOFI, or if any of them do
so, what benefits MEG will derive therefrom. MEG has included
the FOFI in order to provide readers with a more complete
perspective on MEG's future operations and such information may not
be appropriate for other purposes. MEG disclaims any intention or
obligation to update or revise any FOFI statements, whether as a
result of new information, future events or otherwise, except as
required by law.
About MEG
MEG is an energy company focused on sustainable in situ thermal
oil production in the southern Athabasca oil region of Alberta, Canada. MEG is actively developing
innovative enhanced oil recovery projects that utilize
steam-assisted gravity drainage extraction methods to improve the
responsible economic recovery of oil as well as lower carbon
emissions. MEG transports and sells thermal oil (AWB) to customers
throughout North America and
internationally. MEG is a member of the Pathways Alliance, a group
of Canada's largest oil sands
producers working together to address climate change and achieve
the goal of net zero emissions1 by 2050. MEG's common
shares are listed on the Toronto Stock Exchange under the symbol
"MEG" (TSX: MEG).
Learn more at: www.megenergy.com
For further information, please contact:
Investor Relations
T 403.767.0515
E invest@megenergy.com
Media Relations
T 403.775.1131
E media@megenergy.com
_____________________________
|
1
Scope 1 and scope 2 emissions
|
SOURCE MEG Energy Corp.