MEG Energy Corp.’s shares jumped almost 7 per cent on Monday, a rare sign of good news for an oil sands producer, after the company announced plans to boost production and saw its debt rating upgraded.
MEG has set a new production target of 80,000 barrels per day by early 2015 for phases one, two and 2B of its Christina Lake project, up from the previous target of 60,000 barrels per day. To help achieve this goal, the company will invest an additional $185-million this year, helping push its 2012 capital budget to $1.75-billion.
If the timeline for this boost is achieved, it means MEG will have significantly more production when its Phase 3A comes on stream in 2016. (And full disclosure: I own MEG.)
The oil sands producer was also blessed with a ratings upgrade Monday after Moody’s Investor Service bumped the company’s $750-million senior unsecured notes to B1 from B2, and upgraded its revolving credit facility to Ba1 from Ba2.
MEG took advantage of the action and launched a brand new $700-million offering Monday of notes that are due in 2023.
Moody’s reasoning for the upgrade: MEG’s favourable steam-oil ratio of approximately 2.5, the company’s “significant cash position” and its substantial reserves and land position in key areas of the Athabasca oil sands
The agency even gave hope for more surprises. “The rating could be considered for upgrade if Phases 1 and 2 continue to produce at or above 25,000 barrels per day and Phase 2B advances toward targeted production at anticipated costs, timeline, and economics.”
MEG’s production is currently about 26,000 barrels per day.