MEG Energy beats estimates
CALGARY — Shares in MEG Energy Corp. gained more than four per cent to close at $46.50, up $1.81, on Thursday after it reported record production and financial results for the fourth quarter of 2011.
The thermal oilsands company beat even optimistic forecasts, reporting that production from its northern Alberta operations averaged a record 30,032 barrels of bitumen per day, more than 20 per cent above nameplate capacity of 25,000 and 2,000 ahead of consensus analyst expectations of 28,027.
Cash flow per share came in at 62 cents per share versus consensus of 47 cents.
MEG’S net earnings for the fourth quarter of 2011 were $91 million or 46 cents a share, compared to $61 million or 31 cents a share in the fourth quarter of 2010.
Annual production for 2011 averaged 26,605 barrels per day, at the upper end of MEG’S guidance of 25,000 to 27,000.
“We believed this goal was ambitious because, to our knowledge, it was the first time, even taking into account our plant turnaround, that an oilsands company was able to operate for a full year above design capacity,” said Bill Mccaffrey, president and chief executive, on a conference call with analysts.
He added the operation had industry leading operating costs and netbacks.
UBS analyst Chad Friess said confidence is increasing that MEG could meet the high end of its 26,000-28,000 barrels per day 2012 production guidance.
“MEG’S Q4 results reinforced our central thesis on the story, namely that operational performance will continue to impress, driving opportunities for enhancements such as infill wells, non-condensable gas injection and the repurposing of conserved steam to new wells pairs, all of which will facilitate increased production at minimal incremental capital cost,” wrote Friess.
Canaccord Genuity analyst Phil Skolnick said MEG has the right combination of a quality reservoir and operational excellence, making it one of the top three in situ oilsands companies in northern Alberta.
“Cenovus, Suncor (with Firebag 3) and MEG, of the companies I cover, so far are setting themselves apart on the SAGD side,” he said.
Michael Dunn of Firstenergy Capital pointed out that MEG’S fourth-quarter cash flow of $122 million almost matched its $125 million cash flow in the full year 2010. It had cash flow of $65 million in Q4 2010.
MEG’S SOR, the barrels of steam required to produce each barrel of bitumen, a key measure of energy efficiency, was 2.3, the same as fourth quarter 2010 and better than facility design of 2.8.
On the call, Mccaffrey said the company is seeing good results from a pilot project to inject small amounts of natural gas into the horizontal wells to replace some of the steam, a plan intended to drive down SOR and leave more steam available to use in new or infill well pairs. He said MEG has seen a 10 to 15 per cent reduction in steam in initial results.
Operating costs for the three months ended Dec. 31 were $13.16 per barrel, compared to $13.89 for the same period in 2010.