CALGARY — The chief executive of MEG Energy said Tuesday he doesn't expect the ongoing dispute between Canada and the U.S. over the Line 5 cross-border pipeline to hurt his company's ability to move heavy oil to the U.S. Gulf Coast.
On a conference call with analysts, Derek Evans — the head of the Calgary-based energy company — said that now that Enbridge Inc.'s Line 3 replacement project is operational, MEG is less concerned about the outcome of bilateral talks over Line 5.
"Line 5 does not carry a huge amount of volume. And I think it's about 330,000 barrels a day. It tends to be light product," said Evans, whose company produces heavy oil from the Athabasca oilsands region of Alberta.
"With Line 3 now up and running, there actually appears to be incremental space on the light system that heavies can utilize with the way that line is now configured. So we're even more comfortable today that the shutdown of Line 5 won't, wouldn't negatively impact our long-haul capacity."
Court documents filed by the federal government say planning is well underway for bilateral talks in the dispute over the Enbridge's cross-border pipeline. A proposed motion filed last week in U.S. District Court in Michigan says the first formal negotiating session between the two countries will happen "shortly.''
Canada decided last month to invoke a 1977 pipelines treaty between the two countries after talks broke down between the state of Michigan and Enbridge. Michigan wants the line shut down for fear of an ecological disaster in the Straits of Mackinac, the waterway where the pipeline crosses the Great Lakes.
But whatever the outcome of the talks, Canada's oil and gas industry already scored a major win last month, when Enbridge brought its $9.3-billion Line 3 replacement project into service. The 1,765-km Line 3 added about 370,000 additional barrels per day of crude oil export capacity from Western Canada to refineries in the U.S. Midwest.
Evans added the company expects to also have additional take-away capacity when the federally owned Trans Mountain expansion project is completed, expected to be sometime in mid to late 2022.
On Monday, MEG Energy reported what Evans called "exceptional financial results" against the backdrop of strengthening global oil prices and an improvement in heavy oil differentials.
The company boosted its output forecast for the year as it reported a profit of $54 million or 17 cents per diluted share in its latest quarter compared with a loss of $9 million or three cents per share a year ago.
Revenues for the three months ended Sept. 30 were $1.09 billion, up from $533 million in the third quarter of 2020.
MEG was expected to earn 29 cents per share on $1 billion of revenue, according to financial data firm Refinitiv.
Adjusted funds flow increased to $239 million or 77 cents per share from $26 million or nine cents per share a year earlier.
Quarterly production increased 28 per cent to 91,506 barrels per day, compared with 71,516 bbls/d in the prior year quarter. As a result, it again increased its annual average production guidance, this time to 92,500 to 93,500 bbls/d from 91,000 to 93,000 bbls/d.
This report by The Canadian Press was first published Nov. 9, 2021
.Companies in this story: (TSX:MEG)
Amanda Stephenson, The Canadian Press