All financial figures in Canadian dollars ($ or
C$) unless otherwise noted
CALGARY, Dec. 1, 2017 /CNW/ - MEG Energy Corp. (TSX:MEG)
announced today its 2018 capital investment plan and operational
guidance. Highlights include:
- A 2018 capital budget of $510
million, 24% of which is directed towards the completion of
the Phase 2B eMSAGP growth project, 20% towards an expansion of the
pilot program involving the company's proprietary eMVAPEX
technology and positioning the company to grow beyond 100,000
barrels per day (bpd), 43% towards sustaining and turnaround costs,
and the remainder towards field infrastructure, corporate and other
initiatives;
- Financial resources available to the company to fund its 2018
capital program include expected internally generated cash flow and
cash on hand;
- Targeted 2018 average production in the range of 85,000 to
88,000 bpd, 2018 exit production in the range of 95,000 to 100,000
bpd, and non-energy operating costs of $4.75
to $5.25 per barrel. The operational guidance takes into
account a major turnaround at the company's Christina Lake Phase 2B
processing facilities planned for 2018, with an anticipated 5,000
to 6,000 bpd impact on production for the year.
"MEG's 2018 capital investment program paves the way for strong
production growth going forward. It completes the application of
eMSAGP on Phase 2B and our journey to grow production to 100,000
bpd by early 2019, further advances our eMVAPEX technology, while
continuing to invest in the necessary infrastructure to support the
future growth of our company," said Bill
McCaffrey, President and Chief Executive Officer. "Our
strong cash balance and a portion of our expected 2018 funds flow
from operations will fully fund the 2018 capital program."
MEG will invest the remaining $120
million of the $350 million
total estimated cost to complete the implementation of the eMSAGP
growth initiative at Christina Lake Phase 2B in 2018. The majority
of the capital will support the drilling of new well pairs, which
will allow the company to increase production by utilizing steam
freed up by the application of MEG's proprietary eMSAGP technology.
Production is expected to continue to ramp up to reach 95,000 to
100,000 bpd by the end of 2018.
"The previously announced reduction in the estimated cost for
the Phase 2B eMSAGP project from $400
million to $350 million came about as a result of
technology-driven efficiency improvements in our reservoir
performance, enhancements to our pad and facility designs and a
focused approach to cost management," said McCaffrey. "At current
strip prices, the project is anticipated to deliver approximately
50% IRR and increase production to 100,000 bpd, while driving down
our cash costs by $4 to $5 per
barrel."
Sustaining and maintenance capital of $220 million, or approximately $7 per barrel, will support the drilling of new
sustaining well pairs and major turnaround activities at the
company's Christina Lake Phase 2B processing facilities during
2018. In compliance with regulatory requirements, MEG conducts
thorough vessel inspections on its major facilities every five
years. The 2018 planned turnaround at Phase 2B is anticipated to
cost $38 million and last
approximately 35 days during the second quarter.
Further, MEG has allocated $100
million in 2018 to support additional testing of the
company's proprietary eMVAPEX technology and to position itself for
growth beyond 100,000 bpd commencing in 2019. To date, the company
has implemented the technology on three well pairs and their
associated infill wells with encouraging results. The 2018 capital
allows for the conversion to eMVAPEX of up to seven additional well
pairs and associated infills, and the construction of a solvent
recycling facility to test the commerciality and scalability of the
technology.
"eMVAPEX has the potential to dramatically decrease MEG's
steam-oil ratio, reduce future capital costs by lessening the
requirement for steam and water handling capacity at the central
plant facility, and further decrease operating costs and greenhouse
gas emission intensities," said McCaffrey. "If proven successful,
eMVAPEX, along with eMSAGP, will form the basis for the majority of
our highly-economic growth beyond 100,000 bpd to our permitted
capacity of 210,000 bpd at Christina
Lake. Our 2018 capital program sets the stage for production
growth of approximately 8 to 10% in 2019."
The majority of the remaining $70
million will be allocated towards field infrastructure
necessary to support the company's ongoing production growth.
Other initiatives include marketing, regulatory and reservoir
optimization capital.
2018 Capital
Investment Summary
|
$
millions
|
eMSAGP growth
capital
|
120
|
eMVAPEX and future
growth capital
|
100
|
Sustaining and
maintenance
|
220
|
Field infrastructure,
corporate and other
|
70
|
|
510
|
2018 Operational Guidance
MEG is targeting 2018 average production of 85,000 to 88,000 bpd
and 2018 exit production of 95,000 to 100,000 bpd. The 2018 average
production guidance represents a 9% annual growth rate from the
mid-point of the company's 2017 average production target.
Related non-energy operating costs for 2018 are anticipated to be
in the range of $4.75 to $5.25 per
barrel. The operational guidance takes into account a 35-day
turnaround at the company's Christina Lake Phase 2B production
facility planned for the second quarter of 2018.
|
2018
guidance
|
2017 guidance
(revised)
|
Production -
average
|
85,000 to 88,000
bpd
|
80,000 to 82,000
bpd
|
Production -
exit
|
95,000 to 100,000
bpd
|
86,000 to 89,000
bpd
|
Non-energy operating
costs
|
$4.75 to $5.25 per
barrel
|
$4.75 to $5.00 per
barrel (Oct 2017)
$5.00 to $5.50 (July
2017)
$5.75 to $6.75 (Dec
2016)
|
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, steam-oil ratios, 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; 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, 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, for example, the securing of adequate
supplies and access to markets and transportation infrastructure;
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; 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, interest rates and foreign
exchange rates, and, risks and uncertainties related to 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; risks and uncertainties associated with securing and
maintaining the necessary regulatory approvals and financing to
proceed with MEG's future phases and the expansion and/or operation
of MEG's projects; risks and uncertainties related to the timing of
completion, commissioning, and start-up, of MEG's future phases,
expansions and projects; and the operational risks and delays in
the development, exploration, production, and the capacities and
performance associated with MEG's projects.
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
SEDAR website which is available at www.sedar.com.
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 MEG assumes no obligation to update or revise any
forward-looking information to reflect new events or circumstances,
except as required by law. 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."
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".
Investors
Helen
Kelly
Director, Investor Relations
403-767-6206
helen.kelly@megenergy.com
Media
Davis
Sheremata
Senior Advisor, External Communications
587-233-8311
davis.sheremata@megenergy.com
SOURCE MEG Energy Corp.