Operating income falls two-thirds despite record-setting output
A MEG Energy employee works inside Christina Lake facilities near Fort McMurray. The company reported lower operating earnings on Thursday.
Photograph by: Photo courtesy MEG Energy , Handout
CALGARY
— Wider price discounts blunted the benefits of record bitumen
production at MEG Energy Corp. in the second quarter but the company
said improving pipeline access will soon brighten the picture.
The company announced record average quarterly production of 30,429 barrels of bitumen per day and record low non-energy operating costs of $7.79 per barrel.
But lower prices hit the bottom line hard, as MEG realized an average of $45.59 per barrel in the three-month period versus $62.78 in the second quarter of 2011. Benchmark West Texas Intermediate crude averaged $93.49 per barrel in the three months ended June 30.
President and chief executive Bill McCaffrey said a series of pipeline projects that are underway, including the reversal and expansion of Enbridge Inc.’s Seaway pipeline from the oversupplied Cushing, Okla., hub to Texas, will gradually reduce that wide differential.
“I think this is probably one of the most exciting times in the past decade or two in terms of the positioning that is going on in infrastructure that makes a permanent difference in the value of oilsands and these projects are unfolding in terms of implementation over the next 18 to 24 months,” he said.
MEG stock closed at $40.80, up $1.89 or nearly five per cent.
Cash flow dropped to $60 million or 30 cents per share, compared to $88 million or 45 cents per share in second quarter 2011; operating earnings fell to $11 million or six cents per share versus $36 million or 18 cents; and MEG recorded a net loss of $30 million or 15 cents per share (mainly due to foreign exchange fluctuations) compared to net income of $42 million or 21 cents.
McCaffrey hinted on the call that MEG is also looking at a rail transportation option.
“We are looking at it very specifically,” McCaffrey said. “We are very actively pursuing the options of rail, barge.”
Competitor Southern Pacific Resource Corp. recently announced it plans to move all of the output from its 12,000-bpd STP-McKay thermal project when it begins producing by trucks, rail cars and Mississippi River barges to refineries on the U.S. Gulf Coast.
Andrew Potter, an analyst for CIBC World Markets, said in a morning note to investors that MEG’s results were in line with analyst expectations.
“(Cash flow per share) was down 32 per cent year-over-year and 17 per cent sequentially despite strong operating results, reflecting pricing pressure from widening heavy oil differentials and discounts on MEG’s Access Western Blend crude vs. benchmarks,” he pointed out.
Last week, MEG announced it will accelerate spending by $380 million this year to add 20,000 bpd to planned output from its steam-assisted gravity drainage oilsands projects south of Fort McMurray.
The company plans to use in-fill wells and the injection of non-condensible natural gas to enhance recovery and reduce steam requirements, taking its new production target from Christina Lake Phases 1, 2 and 2B to 80,000 bpd at the end of 2014 or early 2015, versus the previous 60,000 bpd.
dhealing@calgaryherald.com
The company announced record average quarterly production of 30,429 barrels of bitumen per day and record low non-energy operating costs of $7.79 per barrel.
But lower prices hit the bottom line hard, as MEG realized an average of $45.59 per barrel in the three-month period versus $62.78 in the second quarter of 2011. Benchmark West Texas Intermediate crude averaged $93.49 per barrel in the three months ended June 30.
President and chief executive Bill McCaffrey said a series of pipeline projects that are underway, including the reversal and expansion of Enbridge Inc.’s Seaway pipeline from the oversupplied Cushing, Okla., hub to Texas, will gradually reduce that wide differential.
“I think this is probably one of the most exciting times in the past decade or two in terms of the positioning that is going on in infrastructure that makes a permanent difference in the value of oilsands and these projects are unfolding in terms of implementation over the next 18 to 24 months,” he said.
MEG stock closed at $40.80, up $1.89 or nearly five per cent.
Cash flow dropped to $60 million or 30 cents per share, compared to $88 million or 45 cents per share in second quarter 2011; operating earnings fell to $11 million or six cents per share versus $36 million or 18 cents; and MEG recorded a net loss of $30 million or 15 cents per share (mainly due to foreign exchange fluctuations) compared to net income of $42 million or 21 cents.
McCaffrey hinted on the call that MEG is also looking at a rail transportation option.
“We are looking at it very specifically,” McCaffrey said. “We are very actively pursuing the options of rail, barge.”
Competitor Southern Pacific Resource Corp. recently announced it plans to move all of the output from its 12,000-bpd STP-McKay thermal project when it begins producing by trucks, rail cars and Mississippi River barges to refineries on the U.S. Gulf Coast.
Andrew Potter, an analyst for CIBC World Markets, said in a morning note to investors that MEG’s results were in line with analyst expectations.
“(Cash flow per share) was down 32 per cent year-over-year and 17 per cent sequentially despite strong operating results, reflecting pricing pressure from widening heavy oil differentials and discounts on MEG’s Access Western Blend crude vs. benchmarks,” he pointed out.
Last week, MEG announced it will accelerate spending by $380 million this year to add 20,000 bpd to planned output from its steam-assisted gravity drainage oilsands projects south of Fort McMurray.
The company plans to use in-fill wells and the injection of non-condensible natural gas to enhance recovery and reduce steam requirements, taking its new production target from Christina Lake Phases 1, 2 and 2B to 80,000 bpd at the end of 2014 or early 2015, versus the previous 60,000 bpd.
dhealing@calgaryherald.com
Read more: http://www.calgaryherald.com/Update+Lower+prices+Energy+bottom+line/6993698/story.html#ixzz21lhm40B0
http://www.calgaryherald.com/business/Lower+bitumen+prices+Energy+bottom+line/6993698/story.html
No comments:
Post a Comment