MEG Energy announces 2013 capital budget and production guidance
Tuesday, Dec 11, 2012
CALGARY, ALBERTA--(Marketwire - Dec. 10, 2012) - MEG Energy Corp. (TSX:MEG) ("MEG" or "the company") released its 2013 capital budget and production guidance today, which includes planned capital investment of approximately $1.9 billion (including $90 million deferred from previously planned 2012 investments) and a production target of 32,000 to 35,000 barrels per day (bpd). Goals for 2013 include:

"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 Officer. "RISER, Christina Lake Phase 2B, Stonefell and our strategy to increase market access are on track, becoming a reality in 2013."

The largest portion of the 2013 capital investment plan (approximately $500 million), is directed to MEG's RISER initiative, which focuses on increasing production and throughput capacity from the company's existing facilities in the near-term.

"MEG's 2013 capital budget focuses investment on those projects which are expected to generate the highest returns and lead to near-term production and cash flow gains. Accelerating cash flows further improve the company's financial strength to support our significant growth plans," said McCaffrey.

As part of the RISER initiative, MEG plans to deploy enhanced modified steam and gas push (eMSAGP) technology to additional well pads in 2013. Combined with initial production from the start-up of Phase 2B, which remains on budget and scheduled to begin steaming in the second half of the year, MEG is targeting average 2013 production volumes of 32,000 to 35,000 bpd.

"Our production target for 2013 is approximately twenty percent above projected 2012 volumes and we expect further increases that will double current rates in 2014" said McCaffrey. "At the same time that we are driving towards higher production, efficiency improvements with RISER are expected to reduce non-energy operating costs to $9 to $11 per barrel in 2013 from our 2012 target of $10 to $12 per barrel.

In addition to planned spending on the RISER initiative, MEG is planning to invest approximately $700 million in growth capital at the company's Christina Lake project. Planned investments include $170 million to complete construction of Phase 2B, $100 million for drilling and completion of an inventory of stand-by wells to take advantage of additional freed-up steam with the implementation of eMSAGP, and $220 million for engineering, long lead-time items and site preparation for Phase 3A. A final capital cost estimate for Phase 3A is expected by mid-2013.

"As we've continued to advance engineering for Christina Lake Phase 3A, we've been identifying synergies with plans for our Phase 3B processing facilities," said McCaffrey. "With twin plants located side-by-side, there are significant opportunities to optimize our investment for shared access, utilities and infrastructure, as well as leveraging our growing experience with RISER. We see significant benefits for both phases."

Christina Lake Phase 3A is currently planned for completion in 2016. With future development phases at Christina Lake and the initial phase of MEG's Surmont Project, the company is continuing to target installed production capacity of 260,000 bpd by the end of 2020.

As MEG advances its growth strategy, it is also investing in infrastructure to support increased production via expanded market access and to further strengthen revenues realized from each barrel of production. Approximately $360 million is targeted to enhance MEG's strategic pipeline system and marketing hub in the Edmonton area. This includes expansion of the jointly-owned Access Pipeline, which connects Christina Lake operations to the Edmonton area, and completion of the 900,000 barrel Stonefell Terminal in mid-2013.

"Proprietary pipeline capacity and storage are central to our 'hub and spoke' marketing strategy," said McCaffrey. "Together, Access and Stonefell provide flexibility to acquire and move diluent to our projects and ship our product blends to the most attractive markets, helping get more value out of every barrel, while significantly mitigating differentials and pipeline restrictions."

The Edmonton hub provides connections to current and developing markets through pipelines and other transportation options. MEG has already secured long-term capacity commitments on pipelines to the U.S. Gulf Coast and options on proposed pipeline capacity to Canada's West Coast. MEG has also secured initial rail and barge transportation capacity to reach higher value markets, with commitments and plans to further expand alternative transportation in 2013.

To support existing operations, MEG is planning $80 million in sustaining and maintenance capital spending in 2013. Funding is planned for new wells to replace expected production declines in Phases 1 and 2 well pairs, as well as capital for routine maintenance.

Source: Marketwire

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