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[Americangreed]

Low cost structure, low sustaining capital and significant financial liquidity set strong foundation in the current price environment

CALGARY, ALBERTA--(Marketwired - Feb. 5, 2015) - MEG Energy Corp. (TSX:MEG) today reported fourth quarter and full-year 2014 operating and financial results. Highlights include:

• Record quarterly production of 80,349 barrels per day (bpd) and record annual production of 71,186 bpd, more than double 2013 annual volumes;
  
• Record-low quarterly non-energy operating costs of $6.42 per barrel and record-low annual non-energy operating costs of $8.02 per barrel;
  
• Quarterly cash flow from operations of $134 million, contributing to record annual cash flow from operations of $791 million;
  
• Year-end cash and cash equivalents of $656 million.
  

"With the successful ramp-up of Christina Lake Phase 2B and the continuing implementation of MEG's RISER initiative, we have built a low-cost production base. This provides a solid foundation in the current price environment and attractive opportunities in the future," said Bill McCaffrey, President and Chief Executive Officer. "We remain focused on finding new ways to profitably grow the business by increasing production at low-capital levels, tightly managing our operating costs, and achieving the highest possible netbacks through our value chain."

MEG's annual production for 2014 averaged 71,186 bpd, an increase of 102% over 2013 volumes of 35,317 bpd, marking the company's seventh consecutive year of annual production gains. Production rates for the fourth quarter of 2014 increased to a record 80,349 bpd from comparative fourth quarter 2013 production of 42,251 bpd.

Related non-energy operating costs for the fourth quarter were a record-low $6.42 per barrel, compared to $8.09 in the fourth quarter of 2013. Annual non-energy operating costs were also at a record low of $8.02 per barrel. Lower costs on both a quarterly and annual basis are reflective of higher production volumes from Phase 2B and increased plant efficiency.

MEG had initially targeted 2014 average production volumes at 60,000 to 65,000 barrels per day at a non-energy operating cost of $8 to $10 per barrel. With strong performance in the first half of the year, production targets were upwardly revised to 65,000 to 70,000 bpd.

While fourth quarter 2014 production volumes exceeded 80,000 bpd, sales volumes were lower at approximately 70,000 bpd. The difference between production and sales was primarily due to the impact of line fill required for the start-up during the quarter of the Flanagan-Seaway pipeline, on which MEG has contracted capacity.

"With the start-up of the Flanagan-Seaway pipeline, MEG now has an additional low-cost option to move our production to the U.S. Gulf Coast," says McCaffrey. "This is a key piece in our 'hub and spoke' marketing strategy that expands our ability to receive world pricing for our barrels."

Cash flow from operations increased nearly six-fold to $134 million in the fourth quarter of 2014 from $23 million in the fourth quarter of 2013. The increase is primarily due to higher bitumen sales volumes and market price realizations, partially offset by an increase in natural gas energy costs and lower power revenues, as well as an increase in interest expense as a result of the weakening Canadian dollar and its impact on U.S. dollar denominated interest expense.

For the full year 2014, cash flow from operations increased 213% to $791 million from $253 million in 2013, primarily reflecting the same impacts noted for the fourth quarter.

Fourth quarter 2014 operating earnings were $8 million compared to an operating loss of $33 million for the same period in 2013. The increase in operating earnings is primarily due to increased bitumen sales volumes and higher price realizations. MEG recognized operating earnings of $247 million for the full-year 2014 compared to $0.4 million in 2013.

Capital investment

MEG's capital investment in 2014 totaled $1.2 billion, a reduction of approximately $600 million from the company's 2014 capital budget. Reduced capital spending reflects MEG's focus on lower-capital cost brownfield investments and deferrals of some planned spending in light of lower commodity prices.

In December 2014, MEG announced a 2015 capital program of $305 million. Although the current program is focused primarily on sustaining and maintenance capital, MEG continues to target production growth of approximately 19% over its upwardly-revised 2014 guidance to a target of 78,000 to 82,000 barrels per day in 2015, while providing for two scheduled plant turnarounds.

Operational and Financial Highlights

The following table summarizes selected operational and financial information of the Corporation for the periods noted. All dollar amounts are stated in Canadian dollars unless otherwise noted:

		Year ended December 31				2014							2013
($ millions, except as indicated)		2014		2013		Q4		Q3		Q2	Q1		Q4		Q3	Q2		Q1
Bitumen production - bbls/d		71,186		35,317		80,349		76,471		68,984	58,643		42,251		34,246	32,144		32,531
Bitumen sales - bbls/d		67,243		33,715		70,116		69,757		70,849	58,089		35,990		32,175	32,175		32,393
Bitumen realization - $/bbl		62.67		49.28		50.48		65.12		72.75	62.28		38.22		74.33	53.98		30.04
Net operating costs - $/bbl(1)		12.06		10.01		10.13		10.31		14.49	13.63		11.22		9.40	8.85		10.44
Non-energy operating costs - $/bbl		8.02		9.00		6.42		7.16		9.64	9.05		8.09		9.20	10.00		8.81
Cash operating netback(2) - $/bbl		44.87		35.87		35.56		48.70		51.45	43.51		23.78		59.59	41.93		17.90
Cash flow from operations(3)		791		253		134		238		262	157		23		144	79		7
Per share, diluted(3)		3.52		1.13		0.60		1.06		1.16	0.70		0.10		0.64	0.35		0.03
Operating earnings (loss)(3)		247		0.4		8		87		111	41		(33	)	56	14		(37	)
	Per share, diluted(3)	1.10		-		0.04		0.39		0.49	0.18		(0.15	)	0.25	0.25		(0.16	)
Revenue (4)		2,830		1,334		615		706		829	680		350		402	324		258
Net earnings (loss)(5)		(106	)	(166	)	(150	)	(101	)	249	(103	)	(148	)	115	(62	)	(71	)
	Per share, basic	(0.47	)	(0.75	)	(0.67	)	(0.45	)	1.12	(0.46	)	(0.67	)	0.52	(0.28	)	(0.32	)
	Per share, diluted	(0.47	)	(0.75	)	(0.67	)	(0.45	)	1.11	(0.46	)	(0.67	)	0.51	(0.28	)	(0.32	)
Total cash capital investment(6)		1,238		2,112		324		291		299	324		366		455	636		655
Cash, cash equivalents and short-term investments		656		1,179		656		777		840	890		1,179		647	1,204		1,803
Long-term debt(7)		4,366		4,005		4,366		4,218		4,016	4,162		4,005		2,858	2,923		2,823

(1)	Net operating costs include energy and non-energy operating costs, reduced by power revenue.
(2)	Cash operating netbacks are calculated by deducting the related diluent, transportation, operating expenses and royalties from proprietary sales volumes and power revenues, on a per barrel basis.
(3)	Cash flow from operations, Operating earnings (loss), and the related per share amounts do not have standardized meanings prescribed by International Financial Reporting Standards ("IFRS") and therefore may not be comparable to similar measures used by other companies. These non-GAAP measurements are reconciled to net earnings (loss) and net cash provided by (used in) operating activities in accordance with IFRS under the heading "NON-GAAP MEASUREMENTS" and discussed further in the "ADVISORY" section of MEG's Fourth Quarter 2014 Report to Shareholders.
(4)	The total of Petroleum revenue, net of royalties and Other revenue as presented on the Consolidated Statement of Earnings (Loss) and Comprehensive Income (Loss).
(5)	Includes an unrealized foreign exchange loss on translation of the U.S. dollar denominated debt of $150 million and $368 million, respectively, for the three months and year ended December 31, 2014. Includes an unrealized foreign exchange loss on translation of U.S. dollar denominated debt of $128 million and $214 million, respectively, for the three months and year ended December 31, 2013.
(6)	Defined as total capital investment excluding capitalized interest and non-cash items.
(7)	Includes current and long-term portions.

A full version of MEG's Fourth Quarter 2014 Report to Shareholders, including unaudited financial statements, is available at www.megenergy.com/investors and at www.sedar.com.

A conference call will be held to review the financial results at 9:00 a.m. Mountain Time (11:00 a.m. Eastern Time) on Thursday, February 5, 2015. The U.S./Canada toll-free conference call number is 1 866-223-7781. The international conference call number is 416-340-2216.

Forward-Looking Information

This document may contain forward-looking information including but not limited to: expectations of future production, revenues, expenses, cash flow, operating costs, steam-oil ratios ("SORs"), pricing differentials, reliability, profitability and capital investments; estimates of reserves and resources; the anticipated reductions in operating costs as a result of optimization and scalability of certain operations; and the anticipated sources of funding for operations and capital investments. Such forward-looking information is based on management's expectations and assumptions regarding future growth, results of operations, production, future capital and other expenditures, plans for and results of drilling activity, environmental matters, business prospects and opportunities.

By its nature, such forward-looking information involves significant known and unknown risks and uncertainties, which could cause actual results to differ materially from those anticipated. These risks include, but are not limited to: risks associated with the oil and gas industry, for example, the securing of adequate supplies and access to markets and transportation infrastructure; the availability of capacity on the electrical transmission grid; the uncertainty of reserve and resource estimates; the uncertainty of estimates and projections relating to production, costs and revenues; health, safety and environmental risks; risks of legislative and regulatory changes to, amongst other things, tax, land use, royalty and environmental laws; assumptions regarding and the volatility of commodity prices and foreign exchange rates; risks and uncertainties associated with securing and maintaining the necessary regulatory approvals and financing to proceed with MEG's future phases and the expansion and/or operation of MEG's projects; risks and uncertainties related to the timing of completion, commissioning, and start-up, of MEG's future phases, expansions and projects; and the operational risks and delays in the development, exploration, production, and capacities and performance associated with MEG's projects.

Although MEG believes that the assumptions used in such forward-looking information are reasonable, there can be no assurance that such assumptions will be correct. Accordingly, readers are cautioned that the actual results achieved may vary from the forward-looking information provided herein and that the variations may be material. Readers are also cautioned that the foregoing list of assumptions, risks and factors is not exhaustive.

Further information regarding the assumptions and risks inherent in the making of forward-looking statements can be found in MEG's annual information form ("AIF") dated March 5, 2014, along with MEG's other public disclosure documents. Copies of the AIF and MEG's other public disclosure documents are available through the SEDAR website which is available at www.sedar.com.

The forward-looking information included in this document is expressly qualified in its entirety by the foregoing cautionary statements. Unless otherwise stated, the forward-looking information included in this document is made as of the date of this document and the Corporation assumes no obligation to update or revise any forward-looking information to reflect new events or circumstances, except as required by law.

Non-GAAP Financial Measures

This document includes references to financial measures commonly used in the crude oil and natural gas industry, such as operating earnings and cash flow from operations. These financial measures are not defined by International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board and therefore are referred to as non-GAAP measures. The non-GAAP measures used by MEG may not be comparable to similar measures presented by other companies. MEG uses these non-GAAP measures to help evaluate its performance. Management considers operating earnings as a performance measure to provide comparability of financial performance between periods by excluding non-operating items. Management uses cash flow from operations as a supplemental measure of MEG's efficiency and its ability to fund future capital investments. These non-GAAP measures should not be considered as an alternative to or more meaningful than net earnings (loss) or net cash provided by (used in) operating activities, as determined in accordance with IFRS, as an indication of MEG's performance. The non-GAAP measure of operating earnings is reconciled to net earnings (loss), while cash flow from operations is reconciled to net cash provided by (used in) operating activities, as determined in accordance with IFRS, under the heading "Non-GAAP Measurements" in MEG's Fourth Quarter 2014 Report to Shareholders.

MEG Energy Corp. is focused on sustainable in situ oil sands development and production in the southern Athabasca oil sands region of Alberta, Canada. MEG is actively developing enhanced oil recovery projects that utilize SAGD extraction methods. MEG's common shares are listed on the Toronto Stock Exchange under the symbol "MEG."