To Our Shareholders

A Message from Bill McCaffrey

110120Meg64119.jpg 2016 and 2017 have been extremely important for MEG Energy. Our comprehensive refinancing plan, successfully completed in late January, extended the maturity profile of our debt to nearly five years under favourable terms. This refinancing included a $518 million equity issuance, which opened the door for us to refocus on growth toward 210,000 barrels per day.

In 2016, MEG Energy utilized its proven, proprietary eMSAGP technology to achieve record annual production of 81,245 barrels per day while at the same time reducing annual per barrel net operating costs and per barrel non-energy operating costs to record lows. We are now using the same technology to springboard forward our growth plans on Phase 2B.

The benefits of eMSAGP

Over the past six years we have proven and commercially applied eMSAGP on Phase 1 and 2, which account for approximately 25% of our total field-wide production. In those specific well patterns where eMSAGP has already been deployed, the company is currently seeing a steam-oil ratio of approximately 1.3, with the freed-up steam being diverted into new wells to further increase production. As we apply eMSAGP to the remainder of our wells at Phase 2B, we believe the value of this technology is going to become very apparent. 

We expect the implementation of eMSAGP at Phase 2B to ramp up to full capacity by early 2019, taking production to 100,000 barrels per day and reducing our cash costs by approximately $4 to $5 per barrel.

Marketing Strategy

We continue to work to diversify markets and reduce the price differential for MEG’s heavy oil production. An important component of the company’s marketing strategy is our access to the Gulf of Mexico through the Flanagan-Seaway pipeline system. Combined with our use of rail, Flanagan-Seaway gives MEG a competitive advantage to gaining access to that important market as we continue to pursue additional transportation opportunities. 

May River Application

MEG has recently submitted an application to the Alberta Energy Regulator for the May River Project, which has a total planned capacity of approximately 160,000 barrels per day. MEG now has close to 500,000 barrels per day of production approved or under regulatory review. 

MEG has put in place a very solid foundation to move forward with its plans. Our focus through 2017 is on the successful execution of those plans.

 

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Bill McCaffrey
President & CEO
MEG Energy