(Reuters) - Canada’s MEG Energy Corp (MEG.TO) on Thursday reported a bigger-than-expected quarterly loss and slashed its capital budget for the year as it cuts costs to offset weak overall demand for Canadian heavy crude in a volatile oil market.
The company cut its capital budget by about 14 percent to C$510 million ($397 million) for the full year, joining rival Husky Energy Inc (HSE.TO) which also cut its budget on Thursday.
MEG, which extracts crude from oil sands in the Athabasca region, said bitumen production fell 0.5 percent to 83,008 barrels per day in the latest quarter.
Calgary, Alberta-based MEG is planning on expanding current projects, rather than starting new ones, to deal with expensive production.
Despite the loss, the company said realized bitumen prices rose C$9 per barrel as it benefited from higher demand for Canadian heavy crude from U.S. Gulf Coast refiners.
MEG’s net operating costs fell nearly 23 percent to C$6 per barrel.
On a conference call, MEG head of investor relations John Rogers called the lower costs “unbelievable,” saying: “We continue to see positive trends in this area. Our new guidance is in the range of C$4.75 to C$5.”
However, that would not be realized in the next few years, as further cost reductions will mostly come from utilizing economies of scale as the company increases production, said MEG Chief Executive William McCaffrey.
MEG targets hitting 100,000 barrels per day by the early part of 2019, he said.
McCaffrey also said the company’s modified steam-and-gas push pilot, which has the goal of improving efficiency in extracting oil, has been “encouraging.”
He added the company is “very focused” on considering sales of assets such as pipelines, but that the current low oil-price environment is not ideal to make deals.
MEG reported a net profit of C$84 million ($65.47 million), or 28 Canadian cents per share, in the latest quarter, compared with a loss of C$109 million, or 48 Canadian cents per share, a year earlier.
Excluding items, the company posted a loss of 14 Canadian cents per share compared with analysts’ average estimate of a loss of 11 Canadian cents, according to Thomson Reuters I/B/E/S.
Shares of MEG were down 2.9 percent at C$5.91 on the Toronto Stock Exchange.
Cole Kachur, an analyst at ScotiaWealth Management, lauded the company’s efforts to cut costs and said shares were likely moving on “overall sentiment,” not on results.
MEG’s revenue rose 10 percent to C$546 million.
Reporting by Anirban Paul in Bengaluru and Ethan Lou in Calgary, Alberta; Editing by Supriya Kurane and Tom Brown