UPDATE 1-MEG Energy profit doubles as production rises

Thu Oct 24, 2013 12:23pm EDT
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Oct 24 (Reuters) - Profit at Canadian oil sands producer MEG Energy Corp more than doubled in the third quarter, the company reported on Thursday, driven by a rise in output that is expected to accelerate next year.

MEG Energy, whose key operations are in the southern Athabasca oil sands region of Alberta, said it anticipates finishing the year in the upper half of its production forecast of 32,000 to 35,000 barrels per day (bpd).

Production is expected to more than double to hit 80,000 bpd by early 2015, the company said. Steam injection at Phase 2B of its Christina Lake project started in the third quarter, allowing a significant increase in production.

MEG executives also said the company has been working to diversify its crude shipments in a bid to avoid congestion on pipelines.

"As we follow barrels from the wellhead to market we are seeing good progress on a marketing strategy aimed at bypassing pipeline congestion and achieving world prices for every barrel we produce," John Rogers, MEG's vice president of investor relations, told analysts on a conference call.

Limited capacity on crude export pipelines means Canadian heavy crude tends to trade at a discount to the West Texas Intermediate benchmark. Western Canada Select heavy blend was last trading around $33.00 per barrel below WTI.

Earlier this year, MEG started sending crude to the Chicago area via pipeline and rail, and then loading it onto barges for transport down the Mississippi River system.

It also plans to start shipping significant volumes of crude by rail from the Canexus terminal in Bruderheim, Alberta, later this year.   Continued...