MEG Energy sets $1.9B budget
Firm will raise $800M from shares
Thermal oilsands producer MEG Energy Corp. says it will increase spending by 11 per cent to $1.9 billion in 2013 and boost production by 20 per cent to between 32,000 and 35,000 barrels of bitumen per day.
The company added after markets closed Monday, it will raise $800 million, half through a private placement of 12 million shares at $33 each to a public pension fund, the Caisse de depot et placement du Quebec, an existing shareholder, and the other half through a bought deal stock issue with a syndicate of underwriters.
“I am very excited about the coming year. All the work we have focused on has positioned us to take giant steps forward in 2013 through 2015,” said Bill McCaffrey, president and chief executive, in a news release.
“Our production target for 2013 is approximately 20 per cent above projected 2012 volumes and we expect further increases that will double current rates in 2014.”
New federal guidelines were released Friday designed to make it difficult for stateowned enterprises (SOEs) to take control of Canadian oilsands ventures. That could prevent Chinese-owned CNOOC, for instance, from increasing its current 15-percent stake in MEG.
But spokesman Brad Bellows said the company isn’t counting on that sort of capital backing anyway.
“We expect to be in a position to be fully funded through our 3A expansion through 2016 and we should see some significant growth even prior to that in cash flow,” he said.
“As far as a chill effect from uncertainty around SOE investment, we don’t really see that.”
MEG’s shares closed at $33.65, down $1.07 or about three per cent, on Monday. Its 52-week high is $47.11 set in February.
In a recent note, CIBC World Markets analyst Andrew Potter said the company was well-positioned to fund expansion this year and next with $2.3 billion in cash and credit available at the end of the third quarter and 2013 cash flow estimated at about $280 million.
He also applauded MEG’s announcement that it had secured 100,000 bpd of rail and pipeline capacity to the Gulf Coast starting in 2014, a move designed to thwart discount prices received for Western Canadian crude due to poor market access.
MEG said Monday about $500 million of its 2013 capital budget will be devoted to its initiative to increase production from existing facilities south of Fort McMurray in northern Alberta by deploying enhanced modified steam and gas push technology to additional well pads.
The company is hoping to exit 2013 with output of 37,000 to 43,000 bpd after it completes its Christina Lake 2B project in the second half of the year.
MEG is planning to invest approximately $700 million in growth capital — $170 million to finish Phase 2B, $100 million for drilling and completion of standby wells to use surplus steam and $220 million for engineering, long lead-time items and site preparation for Phase 3A, to be completed in 2016.
The company is aiming for production capacity of 260,000 bpd by the end of 2020.
About $360 million is targeted in 2013 to enhance MEG’s pipeline system and finish work on its 900,000-barrel Stonefell storage terminal and marketing hub near Edmonton.
It also has set a goal to reduce its non-energy costs by 10 per cent to $9 to $11 per barrel.