MEG Energy Reports Second Quarter 2025 Results Including Successful Completion of Major Turnaround and Wildfire Response; Announces 10% Increase to Quarterly Dividend to $0.11 per share
MEG Energy Reports Second Quarter 2025 Results Including Successful Completion of Major Turnaround and Wildfire Response; Announces 10% Increase to Quarterly Dividend to $0.11 per share |
| [31-July-2025] |
CALGARY, AB, July 31, 2025 /CNW/ - MEG Energy Corp. (TSX: MEG) ("MEG" or the "Corporation") reported its second quarter 2025 operational and financial results.1 "We safely and successfully completed the largest planned turnaround in MEG's history in the second quarter, while prioritizing the safety of our workforce and communities during challenging wildfire conditions," said Darlene Gates, President and Chief Executive Officer of MEG. "We made meaningful progress advancing the Facility Expansion Project, including achieving key milestones during the turnaround, which will further unlock significant value from our world-class Christina Lake resource. The 10% dividend increase reflects our continued confidence in the strength of our strategy, and our commitment to delivering sustainable shareholder returns." Key highlights:
The following table summarizes selected operational and financial information of the Corporation for the periods noted. All dollar amounts are stated in Canadian dollars ($ or C$) unless otherwise noted and all per barrel financial results are based on bitumen sales volumes:
Financial Results Adjusted funds flow ("AFF") in the three and six months ended June 30, 2025 was $125 million and $505 million, respectively, compared to $354 million and $683 million in the same periods of 2024. This was primarily driven by lower average WTI benchmark prices and reduced blend sales volumes partially offset by narrower WTI:AWB differentials and lower royalties. On a diluted per-share basis, AFF was $0.49 and $1.97 for the three and six months ended June 30, 2025, respectively, compared to $1.30 and $2.49 in the same periods of 2024. This primarily reflects the combined impacts of decreased AFF partially offset by share repurchases. The Corporation returned $35 million to shareholders during the second quarter of 2025 through the repurchase and cancellation of 0.4 million shares for $9 million and a dividend payment of $26 million. Second quarter net earnings were $67 million in 2025, compared to $136 million in 2024, driven by reduced AFF partially offset by lower depletion and depreciation and deferred income tax expense and an unrealized foreign exchange gain. Year-to-date net earnings were $278 million and $234 million in 2025 and 2024, respectively, whereby lower AFF was more than offset by lower depletion and depreciation and deferred income tax expense and an unrealized foreign exchange gain. Operational Results Bitumen production averaged 63,502 barrels per day, at a 2.38 steam-oil ratio ("SOR"), during the second quarter of 2025 and 83,253 barrels per day, at a 2.31 SOR, during the first half of 2025. This compares to 100,531 barrels per day, at a 2.44 SOR, and 102,309 barrels per day, at a 2.40 SOR, in the same periods of 2024. Production in the first half of 2025 was primarily impacted by planned turnaround activities. In addition, wildfire damage to third-party power line infrastructure delayed the scheduled post-turnaround production ramp-up. The lower SOR reflects improved reservoir quality and optimized design of recent wells partially offset by the impact of the planned turnaround. Non-energy operating costs were $53 million and $106 million, respectively, in the three and six months ended June 30, 2025 compared to $48 million and $98 million in the same periods of 2024, primarily reflecting higher planned maintenance and unexpected wildfire costs. Lower 2025 bitumen sales volumes also contributed to a per barrel increase. Capital expenditures were $200 million and $357 million in the three and six months ended June 30, 2025, respectively, compared to $123 million and $235 million in the same periods of 2024, primarily reflecting planned turnaround activities and FEP investments. Capital Allocation Strategy The Corporation is committed to returning 100% of free cash flow to shareholders through a combination of share repurchases and payment of quarterly base dividends while maintaining balance sheet quality and managing working capital requirements. During the first half of 2025, the Corporation repurchased and cancelled 7.1 million shares under its normal course issuer bid ("NCIB") program at a weighted-average price of $23.66 per share, totaling $168 million. As a result of the Strathcona Resources Ltd. ("Strathcona") unsolicited offer, and in accordance with applicable securities laws, the Corporation has paused all share repurchases under its NCIB program. On July 31, 2025, the Corporation's Board of Directors approved a 10% increase in the quarterly cash dividend to $0.11 per share, reflecting the Corporation's commitment to consistent and long-term dividend growth. This dividend will be paid on October 15, 2025 to shareholders of record on September 12, 2025. Outlook The Corporation's 2025 operating and capital guidance released on November 25, 2024 remains unchanged.
Take-Over Offer On May 30, 2025, an unsolicited take-over offer was made by Strathcona to acquire all MEG's issued and outstanding shares. The Corporation's Board of Directors has unanimously recommended that shareholders reject the offer by taking no action and not tendering their shares. A Directors' Circular, filed on June 16, 2025, provides information for MEG shareholders about MEG's prospects and the Board's analysis, deliberations and recommendations at www.megenergy.com/offer and on www.sedarplus.ca. Additional information can be found in the Investor Presentation, which is available at www.megenergy.com/offer. Strategic Review With a focus on value maximization for Shareholders, the Board has authorized a strategic review of alternatives with the potential to surface an offer superior to MEG's compelling standalone plan. BMO Capital Markets, the Board's financial advisor, has begun an outreach to potential parties to solicit interest in an alternative transaction. Adjusted Funds Flow Sensitivity MEG's production is composed entirely of crude oil, and AFF is highly correlated with crude oil benchmark prices and light-heavy oil differentials. The following table provides an annual sensitivity estimate to the most significant market variables.
Conference Call MEG's management will hold a conference to review MEG's second quarter 2025 results on August 1, 2025, at 6:30 a.m. Mountain Time (8:30 a.m. Eastern Time). To participate, please dial the North American toll-free number 1-800-715-9871, or the international call number 1-647-932-3411. A recording of the call will be available by 12:00 p.m. Mountain Time (2:00 p.m. Eastern Time) on the same day at https://www.megenergy.com/investors/presentations-events/. ADVISORY Basis of Presentation MEG prepares its financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS Accounting Standards") and presents financial results in Canadian dollars ($ or C$), which is the Corporation's functional currency. Non-GAAP and Other Financial Measures Certain financial measures in this news release are non-GAAP financial measures or ratios, supplementary financial measures and capital management measures. These measures are not defined by IFRS and, therefore, may not be comparable to similar measures provided by other companies. These non-GAAP and other financial measures should not be considered in isolation or as an alternative for measures of performance prepared in accordance with IFRS. Adjusted Funds Flow and Free Cash Flow AFF and FCF are capital management measures defined in the Corporation's consolidated financial statements and are presented to assist management and investors in analyzing operating performance and cash flow generating ability. Net cash provided by (used in) operating activities is an IFRS measure in the Corporation's consolidated statement of cash flow. AFF is calculated as net cash provided by (used in) operating activities before the net change in non-cash working capital items and excludes items not considered part of ordinary continuing operating results. By excluding non-recurring adjustments, the AFF measure provides a meaningful metric for management and investors by establishing a clear link between the Corporation's cash flows and cash operating netback. FCF is calculated as adjusted funds flow less capital expenditures. FCF is presented to assist management and investors in analyzing performance by the Corporation as a measure of financial liquidity and the capacity of the business to return capital to shareholders. The following table reconciles Net cash provided by (used in) operating activities to AFF and FCF:
Cash Operating Netback Cash operating netback is a non-GAAP financial measure, or ratio when expressed on a per barrel basis. Its terms are not defined by IFRS and, therefore, may not be comparable to similar measures provided by other companies. This non-GAAP financial measure should not be considered in isolation or as an alternative for measures of performance prepared in accordance with IFRS. Cash operating netback is a financial measure widely used in the oil and gas industry as a supplemental measure of a company's efficiency and its ability to generate cash flow for debt repayment, dividends, capital expenditures, or other uses. The per barrel calculation of cash operating netback is based on bitumen sales volumes. Revenues is an IFRS measure in the Corporation's consolidated statement of earnings and comprehensive income which is the most directly comparable primary financial statement measure to cash operating netback. A reconciliation from revenues to cash operating netback has been provided below:
Blend Sales and Bitumen Realization Blend sales and bitumen realization are non-GAAP financial measures, or ratios when expressed on a per barrel basis, and are used as measures of the Corporation's marketing strategy by isolating petroleum revenue and costs associated with its produced and purchased products and excludes royalties. Their terms are not defined by IFRS and, therefore, may not be comparable to similar measures provided by other companies. These non-GAAP financial measures should not be considered in isolation or as an alternative for measures of performance prepared in accordance with IFRS. Blend sales per barrel is based on blend sales volumes and bitumen realization per barrel is based on bitumen sales volumes. Revenues is an IFRS measure in the Corporation's consolidated statement of earnings and comprehensive income, which is the most directly comparable primary financial statement measure to blend sales and bitumen realization. A reconciliation from revenues to blend sales and bitumen realization has been provided below:
Net Transportation and Storage Expense Net transportation and storage expense is a non-GAAP financial measure, or ratio when expressed on a per barrel basis. Its terms are not defined by IFRS and therefore may not be comparable to similar measures provided by other companies. This non-GAAP financial measure should not be considered in isolation or as an alternative for measures of performance prepared in accordance with IFRS. Per barrel amounts are based on bitumen sales volumes. It is used as a measure of the Corporation's marketing strategy by focusing on maximizing the realized AWB sales price after transportation and storage expense by utilizing its network of pipeline and storage facilities to optimize market access. Transportation and storage expense is an IFRS measure in the Corporation's consolidated statements of earnings and comprehensive income. Power and transportation revenue is an IFRS measure in the Corporation's consolidated statement of earnings and comprehensive income, which is the most directly comparable primary financial statement measure to transportation revenue. A reconciliation from power and transportation revenue to transportation revenue has been provided below.
Bitumen Realization after Net Transportation and Storage Expense Bitumen realization after net transportation and storage expense is a non-GAAP financial measure, or ratio when expressed on a per barrel basis. Its terms are not defined by IFRS and therefore may not be comparable to similar measures provided by other companies. This non-GAAP financial measure should not be considered in isolation or as an alternative for measures of performance prepared in accordance with IFRS. Per barrel amounts are based on bitumen sales volumes. It is used as a measure of the Corporation's marketing strategy by focusing on maximizing the realized AWB sales price after net transportation and storage expense by utilizing its network of pipeline and storage facilities to optimize market access.
Operating Expenses net of Power Revenue and Energy Operating Costs net of Power Revenue Operating expenses net of power revenue and energy operating costs net of power revenue are both non-GAAP financial measures, or ratios when expressed on a per barrel basis. Their terms are not defined by IFRS and, therefore, may not be comparable to similar measures provided by other companies. These non-GAAP financial measures should not be considered in isolation or as an alternative for measures of performance prepared in accordance with IFRS. Per barrel amounts are based on bitumen sales volumes. Operating expenses net of power revenue is used as a measure of the Corporation's cost to operate its facilities at the Christina Lake project after factoring in the benefits from selling excess power to offset energy costs. Energy operating costs net of power revenue is used to measure the performance of the Corporation's cogeneration facilities to offset energy operating costs. Non-energy operating costs and energy operating costs are supplementary financial measures as they represent portions of operating expenses. Non-energy operating costs comprise production-related operating activities and energy operating costs reflect the cost of natural gas used as fuel to generate steam and power. Per barrel amounts are based on bitumen sales volumes. Operating expenses is an IFRS measure in the Corporation's consolidated statement of earnings and comprehensive income. Power and transportation revenue is an IFRS measure in the Corporation's consolidated statement of earnings and comprehensive income which is the most directly comparable primary financial statement measure to power revenue. A reconciliation from power and transportation revenue to power revenue has been provided below.
Forward-Looking Information Certain statements contained in this news release may constitute forward-looking statements within the meaning of applicable Canadian securities laws. These statements relate to future events or MEG's future performance. All statements other than statements of historical fact may be forward-looking statements. The use of any of the words "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "believe", "plan", "intend", "target", "potential" and similar expressions are intended to identify forward-looking statements. Forward-looking statements are often, but not always, identified by such words. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. In particular, and without limiting the foregoing, this press release contains forward looking statements with respect to: the Corporation's 2025 operating and capital guidance, including its expectations regarding 2025 annual average production, capital expenditures and non-energy operating costs; the Corporation's belief that the FEP remains on track for completion in 2027; the Corporation's intent to return 100% of free cash flow to shareholders through a combination of share repurchases and payment of a quarterly base dividend, subject to approval of the Board of Directors; the strategic review process; and the Corporation's funds flow sensitivity estimates. Forward-looking information contained in this press release is based on management's expectations and assumptions regarding, among other things: future crude oil, bitumen blend, natural gas, electricity, condensate and other diluent prices, differentials, the reaction of heavy oil differentials in response to increased Canadian pipeline capacity; foreign exchange rates and interest rates; the recoverability of MEG's reserves and contingent resources; MEG's ability to produce and market production of bitumen blend successfully to customers; future growth, results of operations and production levels; future capital and other expenditures; revenues, expenses and cash flow; operating costs; reliability; continued liquidity and runway to sustain operations through a prolonged market downturn; MEG's ability to reduce or increase production to desired levels, including without negative impacts to its assets; anticipated reductions in operating costs as a result of optimization and scalability of certain operations; anticipated sources of funding for operations and capital investments; plans for and results of drilling activity; the regulatory framework governing royalties, land use, taxes and environmental matters, including federal and provincial climate change policies, in which MEG conducts and will conduct its business; and 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 and uncertainties include, but are not limited to, risks and uncertainties related to: the oil and gas industry, for example, the securing of adequate access to markets and transportation infrastructure (including pipelines and rail) and the commitments therein; 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; support for protectionism and rising anti-globalization sentiment in the United States and other countries; enacted and proposed export and import restrictions, including but not limited to tariffs, export taxes or curtailment on exports; health, safety and environmental risks, including public health crises and any related actions taken by governments and businesses; legislative and regulatory changes to, amongst other things, tax, land use, royalty and environmental laws and production curtailment; the cost of compliance with current and future environmental laws, including climate change laws; risks relating to increased activism and public opposition to fossil fuels and oil sands; the inability to access government support to industry to assist in the achievement of ESG goals; risks relating to shareholder activism; assumptions regarding and the volatility of commodity prices, interest rates and foreign exchange rates; 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; timing of completion, commissioning, and start-up, of MEG's turnarounds; the operational risks and delays in the development, exploration, production, and the capacities and performance associated with MEG's projects; MEG's ability to reduce or increase production to desired levels, including without negative impacts to its assets; MEG's ability to finance capital expenditures; MEG's ability to maintain sufficient liquidity to sustain operations through a prolonged market downturn; changes in credit ratings applicable to MEG or any of its securities; actions taken by OPEC+ in relation to supply management; the impact of the Russian invasion of Ukraine and associated sanctions on commodity prices; the availability and cost of labour and goods and services required in the Corporation's operations, including inflationary pressures; supply chain issues including transportation delays; the cost and availability of equipment necessary to our operations; and changes in general economic, market and business conditions. 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 Company's website at www.megenergy.com/investors and through the SEDAR+ website at www.sedarplus.ca. The forward-looking information included in this news release is expressly qualified in its entirety by the foregoing cautionary statements. Unless otherwise stated, the forward-looking information included in this news release is made as of the date of this news release and MEG assumes no obligation to update or revise any forward-looking information to reflect new events or circumstances, except as required by law. This news release contains future-oriented financial information and financial outlook information (collectively, "FOFI") about MEG's prospective results of operations including, without limitation, the Corporation's AFF based on certain market variables, all of which are subject to the same assumptions, risk factors, limitations, and qualifications as set forth above. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on FOFI. MEG's actual results, performance or achievement could differ materially from those expressed in, or implied by, these FOFI, or if any of them do so, what benefits MEG will derive therefrom. MEG has included the FOFI in order to provide readers with a more complete perspective on MEG's future operations, and the factors that could affect such operations, and such information may not be appropriate for other purposes. MEG disclaims any intention or obligation to update or revise any FOFI statements, whether as a result of new information, future events or otherwise, except as required by law. About MEG MEG is the leading pure-play in situ thermal oil producer in Canada. Our purpose is to meet the growing demand for energy, produced safely and reliably, while generating long-term value for all our stakeholders. MEG produces, transports and sells our oil (AWB) to customers throughout North America and internationally. Our common shares are listed on the Toronto Stock Exchange under the symbol "MEG" (TSX: MEG). Learn more at: www.megenergy.com For further information, please contact: Investor Relations Media Relations SOURCE MEG Energy Corp. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Company Codes: Toronto:MEG | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
