MEG Energy Corp T.MEG

CIBC

[retiredcf]

Currently have a $32.00 target. GLTA

EQUITY RESEARCH
November 5, 2024 Flash Research
MEG ENERGY CORP

First Look: Q3/24 In Line With Our Expectations And
Consensus

MEG reported Q3/24 results that were in line with our expectations and
consensus. Variances to our estimates stemmed primarily from higher
realizations, offset by higher transportation and diluent costs. Key takeaways
from the quarter included initial steaming of a new well pad in late-
September, continued strong non-energy operating costs of $5.18 per Bbl
and unchanged corporate guidance. During the quarter, MEG repurchased
4.1 million shares for total proceeds of $108 million.

Financial And Operating Takeaways
• Q3/24 results. Production of ~103.3 MBbl/d was in line with our estimate
of 104.0 MBbl/d and consensus of ~103.1 MBbl/d (range of 102.0 MBbl/d
to ~104.0 MBbl/d). Adjusted FFO per share of $1.34 was in line with our
estimate of $1.36 and consensus of $1.34 (range of $1.29 to $1.39).
Capex of $141 million was below our estimate of $149.4 million and
consensus of $150 million (range of $143 million to $158 million).
• Operational performance. Q3/24 bitumen production of 103.3 MBbl/d at
an SOR of 2.36x reflected the planned timing of injecting steam in new
well starts. MEG initiated steaming of a second new well pad in late-
September with production scheduled to begin in December. Capex of
$141 million in Q3/24 increased from $83 million in Q3/23, reflecting
higher planned field development activity together with investment in
moderate capacity growth projects. Non-energy operating costs were
$5.18/Bbl, in line with $5.15/Bbl in Q3/23.

• Shareholder returns. MEG’s capital returns to shareholders rose to
100% of FCF starting in October. During the quarter, MEG repurchased
$108 million of shares. MEG repurchased 2.8 million shares for ~$75
million in October.

• Conference call details. The Q3/24 call will be held on November 6,
2024, at 8:30 a.m. ET (6:30 a.m. MT). Conference call 1-888-510-2154
or 1-437-900-0527.

• Valuation. MEG Energy trades at a P/RNAV ratio of 109%, a 2025E
EV/DACF of 6.2x and a 2025E FCF yield of 8% vs. the large cap group
at 90%, 5.7x and 12%, respectively

[robert41]

If oil holds in fcf could 800 million for 2025 equalling another 30 million shares to be bought back creating what is already a super tight float a crazy tight float. At some point I would think the buybacks are reduced and the money redirected to a substantially bigger divi. 

[vwbusman]

Don't forget - even if revenues and fcf stay the same, as the share count diminishes, the dividend can increase to shareholders at no extra cost to the company - e.g. if they buyback and cancel 10% of the shares, the dividend can be raised by 10% and it does not add to the total annual cost of the dividend.  It will be a win win all around to go for a full year with 100% FCF flowing back