MEG earmarks $250 million for capital investment

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MEG Energy Corp. [MEG-TSX] has announced a $250 million capital investment plan for 2020, and said it remains focused on its ongoing debt reduction strategy.

The Calgary company said it is guiding the market to anticipate production of between 94,000 and 97,000 barrels per day in 2020, an amount that takes into account a planned major turnaround with anticipated 2,500 barrels per day impact on production for the year.

“Management remains committed to applying all free cash flow above its 2020 capital investment plan to further debt reduction,” MEG said in a press release. Highlights of the company’s capital reinvestment plan include year-to-date debt repayment of approximately $500 million.

On Friday, MEG shares advanced 0.88% or $0.05 to $5.68 on volume of just over one million. The shares are currently trading in a 52-week range of $4.06 and $8.89.

MEG Energy is a Canadian oil company focused on sustainable in-situ thermal oil development and production in the southern Athabasca region of Alberta. The company is actively developing enhanced oil recovery projects that utilize steam-assisted gravity drainage (SAGD) extraction methods to improve the economic recovery of oil and achieve lower carbon emissions.

The Christina Lake Project, located 150 km south of Fort McMurray, is currently the focus of MEG’s oil development. Comprised of approximately 200 km2 of leases, this SAGD operation currently has regulatory approvals in place to produce approximately 210,000 barrels per day.

In the third quarter of 2019, the company reported bitumen production volumes of 93,278 barrels per day. That marked a 6% decrease over the same period in 2018 due to the impact of the Alberta Government’s mandated production curtailment program which came into effect on January 1, 2019

Highlights from the third quarter included adjusted funds flow of $192 million ($0.63 per share) and $152 million of free cash flow in the quarter.

MEG realized a third quarter 2019 average Access Western Blend (AWB) blend sales price of US$45.63 per barrel, compared to US$51.72 in the second quarter of 2019. The change in average AWB blend sales price quarter over quarter is primarily due to a US$3.37 per barrel reduction in the benchmark WTI index combined with WTI:AWB differentials widening to US$14.52 per barrel from US$12.32 per barrel, and at the U.S. Gulf Coast widening to a discount of US$2.50 from a premium of US$1.64 per barrel.

Meanwhile, the company realized net earnings of $24 million or $0.08 per share in the third quarter, down from $118 million or $0.39 during the same period last year. It attributed the decrease to an unrealized foreign exchange loss and lower unrealized gain on commodity risk management partially offset by a higher cash operating netback.

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