* First-quarter production hits record high
* Sends oil by barge, plans rail shipments to reach U.S.
* High costs, weak Canadian dollar behind 1st-qtr loss
* Shares up 8 pct, largest single-day gain in a year
By Sandhya Vijayan
April 24 Canadian oil sands producer MEG Energy
Corp posted record quarterly output and opened up new
export routes to the United States, putting its shares on track
for their biggest one-day percentage gain in a year.
MEG's stock rose as much as 8 percent on Wednesday after the
company said it had begun sending crude across the border on
barges to avoid congestion in the main pipeline linking the oil
sands of Alberta to U.S. refineries.
Chief Executive Bill McCaffrey said MEG also planned to ship
"significant" volumes of crude by rail in the second half of the
"As we continue through 2013, we expect to deliver
increasing volumes to higher-priced markets," McCaffrey said in
a statement accompanying first-quarter results.
MEG, whose key operations are in the southern Athabasca oil
sands region of Alberta, said expanded steam generation capacity
and enhanced reservoir efficiency measures allowed it to bring
additional wells into production during the quarter.
The company's average production in the first quarter rose
14 percent from a year earlier to a record 32,531 barrels of oil
per day (bopd), overshadowing a quarterly loss driven by higher
costs and a weaker Canadian dollar.
"The production numbers ... reinforce the company's ability
to bring production on line and continue to ramp up volumes,"
said Morningstar analyst David McColl.
MEG said it remained on track to achieve production of
32,000 to 35,000 bopd in 2013.
But, like every major mining project in the Alberta oil
sands -- the world's third-largest reserve of crude oil -- the
company has suffered substantial cost increases.
Net operating costs rose about 31 percent in the quarter to
$10.44 per barrel. The company attributed the increase to higher
natural gas prices and costs associated with its plans to grow
production in the short term.
"The challenge for the company is the pace of capital
spending, as well as the pricing they are getting for their
heavy oil," UBS analyst Chad Friess said.
MEG posted a first-quarter loss of C$71.3 million ($69.5
million), or 32 Canadian cents per share, compared with a profit
of C$53.4 million, or 27 Canadian cents per share, a year
As well as rising costs, the company attributed the loss to
a drop in the value of the Canadian dollar relative to the U.S.
dollar, which resulted in unrealized foreign exchange impacts on
its U.S. dollar-denominated debt, cash and cash equivalents.
Cash flow from operations fell to C$7.1 million in the
quarter from C$72.0 million a year earlier due to lower prices,
particularly in the first two months of the quarter.
Despite the fall, cash flow was well within the expected
range, Friess said.
MEG's shares were trading up 7 percent at C$29.00 in
afternoon trading on the Toronto Stock Exchange.