MEG Energy drives operating costs to record lows at Christina Lake and cuts 2017 capital spending program
In today's third quarter update, Calgary-based MEG Energy says production at Christina Lake averaged just over 83,000 bbl/day, up from 72,450 in the second quarter but roughly unchanged from the same time last year. The company says output was hampered by adverse weather conditions and the timing of tying in new wells, required as part of its eMSAGP Phase 2B project.
eMSAGP (enhanced Modified Steam And Gas Push) is a reservoir enhancement technology where a non-condensable gas is injected into the well, and infill wells are drilled between existing wells to reduced steam loads. The technology was already successfully implemented at Phases 1 and 2 of Christina Lake. MEG says it remains on track to exit 2017 at about 86,000 to 89,000 bbl/day.
Steam-to-oil ratios in the eMSAGP wells averaged 1.3 in this latest quarter. The lower steam and water recycling loads have translated into lower operating costs. Q3 operating costs hit a record-low of $6.00 per barrel ($4.57 ex-energy), down from $7.42 in Q2. Expectations for non-energy operating costs have been lowered to between $4.75 and $5.00 per barrel averaged over the entire year.
MEG says the eMSAGP initiative at Christina Lake Phase 2B is proceeding on schedule and under budget. The company has reduced its 2017 capital spending plan from $590 million to $510 million due to "ongoing efficiency improvements, lower construction costs, improved facility design and the optimization of MEG's investment profile."
CEO Bill McCaffrey says efficiency improvements in the reservoir and modifications made to the pad and process plant have translated into "significant" reductions in capital requirements. eMSAGP implementation on Phase 2B is now expected to cost $17,500 per flowing barrel, a 13% reduction from original estimates.
The company maintains that production growth to 100,000 bbl/day is fully funded internally. Anything beyond 100,000 bbl/day will require a WTI price of US$50 a barrel. Christina Lake has approvals in place for 210,000 bbl/day of production.
For the third quarter, MEG reported an operating loss of $43 million on revenues of $546 million. Factoring in an unrealized foreign exchange gain on its US dollar denominated debt, the company posted a third-quarter profit of $84 million.