UPDATE 2-MEG Energy posts profit as production costs stay at record low
(Adds details on hedging program, CEO comment from conference call, share price)
By Julie Gordon
CALGARY, Alberta, April 28 (Reuters) - MEG Energy Corp , which operates in Canada's oil sands, reported a first-quarter profit, compared with a loss a year earlier, as it managed to keep production costs at record lows to help cushion the impact of a slump in oil prices.
The Calgary-based company also announced a strategic hedging program, entering into contracts on some 10 percent of its blend sales through to the third quarter, in an effort to protect its cash position.
On the cost side, MEG has hedged about 25 percent of its remaining condensate feeds for this year and 40 percent in 2017, Chief Executive William McCaffrey told investors on a conference call.
"Today, the objective of this program is to help protect our liquidity against downside risk," said McCaffrey. "In the longer term, the objective of the program will be to provide cash flow stability to support our capital programs."
Shares were up 6.74 percent at C$7.28 around midday on the Toronto Stock Exchange.
The prolonged slump in crude prices has forced oil producers, including MEG, to try and preserve cash and reduce debt by selling assets, laying off workers and cutting their dividend as well as capital spending.
McCaffrey noted that talks are progressing on the sale of MEG's 50 percent stake in the Access pipeline in northern Alberta, adding that more than one party was interested in the asset, but declined to provide further details. Continued...