MEG Energy Reports Second Quarter 2025 Results Including Successful Completion of Major Turnaround and Wildfire Response; Announces 10% Increase to Quarterly Dividend to $0.11 per share

2025-07-31

TSX - Toronto Stock Exchange · Canada

Canada NewsWire

CALGARY, AB , July 31, 2025 /CNW/ - MEG Energy Corp. (TSX: MEG) ("MEG" or the "Corporation") reported its second quarter 2025 operational and financial results. 1

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"We safely and successfully completed the largest planned turnaround in MEG's history in the second quarter, while prioritizing the safety of our workforce and communities during challenging wildfire conditions," said Darlene Gates , President and Chief Executive Officer of MEG. "We made meaningful progress advancing the Facility Expansion Project, including achieving key milestones during the turnaround, which will further unlock significant value from our world-class Christina Lake resource. The 10% dividend increase reflects our continued confidence in the strength of our strategy, and our commitment to delivering sustainable shareholder returns."

Key highlights:

Excellent Safety Performance: Zero serious incidents, recordable injuries, or reportable spills during turnaround as site population doubled; total recordable incident rate reduced to 0.25 year-to-date and zero serious process safety events. Safe Wildfire Response: Safely evacuated over 850 workers while maintaining stable off-power grid operations following the May 29 Caribou Lake wildfire and third-party infrastructure damage; successful re-mobilization through June including power restored. Dividend Increase: On July 31, 2025 , the Board of Directors approved a 10% increase in the quarterly cash dividend to $0.11 per share payable on October 15, 2025 , to shareholders of record on September 12, 2025 . Phase 2B Turnaround Completed on Time and Budget: Delivered MEG's largest planned turnaround on time and budget; positioned for extended four year turnaround cycles. Facility Expansion Project ("FEP") on track: Expansion remains on track for completion in 2027, with over 150 key FEP tie-ins completed during turnaround to minimize future production interruptions; 5th once-through steam generator delivered and all major equipment purchased. Financial Performance: Generated adjusted funds flow ("AFF") of $125 million ( $0.49 per share). Production of 63,502 bbls/d at a 2.38 steam-oil ratio: Reflects planned turnaround and wildfire delays; achieved pre-turnaround rates within two weeks of restart despite a twelve day delay. July production averaged approximately 109,000 barrels per day and the newest pad of 16 well pairs is on steam ahead of schedule with first oil expected in the third quarter of 2025. Capital Expenditures on Plan: Delivered $200 million of planned capital expenditures, including investments in the turnaround, FEP, and advancing pad development to areas of improved resource quality. Shareholder Returns: Returned $35 million to shareholders by: repurchasing and cancelling 0.4 million shares for $9 million ; and paying a quarterly cash dividend of $26 million ( $0.10 per share) on April 15, 2025 .

Guidance: The Corporation's 2025 operating and capital guidance remains unchanged.

| _ | | 1 All financial figures are in Canadian dollars ($ or C$) and all references to barrels are per barrel of bitumen unless otherwise noted. The Corporation's Non-GAAP and Other Financial Measures are detailed in the Advisory section of this news release. They include: cash operating netback, bitumen realization net of transportation and storage expense, operating expenses net of power revenue, energy operating costs net of power revenue, non-energy operating costs, energy operating costs, adjusted funds flow and free cash flow. |

The following table summarizes selected operational and financial information of the Corporation for the periods noted. All dollar amounts are stated in Canadian dollars ($ or C$) unless otherwise noted and all per barrel financial results are based on bitumen sales volumes:

| | Six months

ended June 30 | 2025 | 2024 | | | | | | | ($millions, except as indicated) | 2025 | 2024 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | | Operational results: | | | | | | | | | | Bitumen production - bbls/d | 83,253 | 102,309 | 63,502 | 103,224 | 100,139 | 103,298 | 100,531 | 104,088 | | Per share, diluted | 0.06 | 0.07 | 0.02 | 0.04 | 0.03 | 0.04 | 0.03 | 0.03 | | Steam-oil ratio | 2.31 | 2.40 | 2.38 | 2.28 | 2.40 | 2.36 | 2.44 | 2.37 | | Bitumen sales - bbls/d | 86,356 | 99,337 | 70,760 | 102,126 | 100,821 | 105,255 | 93,140 | 105,534 | | Business environment: | | | | | | | | | | WTI - US$/bbl | 67.58 | 78.77 | 63.74 | 71.42 | 70.27 | 75.09 | 80.57 | 76.96 | | Differential - WTI:WCS - Edmonton - US$/bbl | (11.47) | (16.46) | (10.27) | (12.67) | (12.56) | (13.55) | (13.61) | (19.31) | | AWB - Edmonton - US$/bbl | 55.24 | 60.98 | 52.70 | 57.77 | 56.82 | 60.62 | 65.99 | 55.96 | | | | | | | | | | | | C$ equivalent of 1 US$ – average | 1.4093 | 1.3586 | 1.3840 | 1.4350 | 1.3991 | 1.3636 | 1.3684 | 1.3488 | | Financial results: | | | | | | | | | | Bitumen realization after net transportation

and storage expense (1) - $/bbl | 58.04 | 66.55 | 46.72 | 65.98 | 62.62 | 65.61 | 73.84 | 60.10 | | | | | | | | | | | | Non-energy operating costs (2) - $/bbl | 6.80 | 5.39 | 8.16 | 5.84 | 5.61 | 5.18 | 5.63 | 5.18 | | Energy operating costs net of power

revenue (1) - $/bbl | 2.33 | 1.10 | 2.72 | 2.06 | 0.90 | 0.64 | 0.99 | 1.19 | | Operating expenses net of power revenue (1)

$/bbl | 9.13 | 6.49 | 10.88 | 7.90 | 6.51 | 5.82 | 6.62 | 6.37 | | Cash operating netback (1) - $/bbl | 37.64 | 43.34 | 25.29 | 46.30 | 41.09 | 41.35 | 47.14 | 39.99 | | | | | | | | | | | | Royalties | 176 | 290 | 68 | 108 | 132 | 169 | 162 | 128 | | | | | | | | | | | | Adjusted funds flow (3) | 505 | 683 | 125 | 380 | 340 | 362 | 354 | 329 | | Per share, diluted | 1.97 | 2.49 | 0.49 | 1.47 | 1.29 | 1.34 | 1.30 | 1.19 | | Capital expenditures | 357 | 235 | 200 | 157 | 172 | 141 | 123 | 112 | | Free cash flow (3) | 148 | 448 | (75) | 223 | 168 | 221 | 231 | 217 | | Per share, diluted | 0.57 | 1.64 | (0.30) | 0.86 | 0.64 | 0.82 | 0.85 | 0.78 | | Weighted average common shares outstanding - diluted | 257 | 274 | 255 | 258 | 263 | 269 | 272 | 276 | | | | | | | | | | | | Debt repayments - US$ | — | 158 | — | — | — | 100 | 53 | 105 | | Share repurchases - C$ | 168 | 195 | 9 | 159 | 151 | 108 | 68 | 127 | | Dividends paid - C$ | 52 | — | 26 | 26 | 27 | — | — | — | | | | | | | | | | | | Revenues | 1,919 | 2,737 | 757 | 1,162 | 1,147 | 1,265 | 1,373 | 1,364 | | | | | | | | | | | | Net earnings | 278 | 234 | 67 | 211 | 106 | 167 | 136 | 98 | | Per share, diluted | 1.08 | 0.86 | 0.26 | 0.82 | 0.40 | 0.62 | 0.50 | 0.36 |

| (1) | Non-GAAP financial measure - please refer to the Advisory section of this news release. | | (2) | Supplementary financial measure - please refer to the Advisory section of this news release. | | (3) | Capital management measure - please refer to the Advisory section of this news release. |

Financial Results

Adjusted funds flow ("AFF") in the three and six months ended June 30, 2025 was $125 million and $505 million , respectively, compared to $354 million and $683 million in the same periods of 2024. This was primarily driven by lower average WTI benchmark prices and reduced blend sales volumes partially offset by narrower WTI:AWB differentials and lower royalties.

On a diluted per-share basis, AFF was $0.49 and $1.97 for the three and six months ended June 30, 2025 , respectively, compared to $1.30 and $2.49 in the same periods of 2024. This primarily reflects the combined impacts of decreased AFF partially offset by share repurchases.

The Corporation returned $35 million to shareholders during the second quarter of 2025 through the repurchase and cancellation of 0.4 million shares for $9 million and a dividend payment of $26 million .

Second quarter net earnings were $67 million in 2025, compared to $136 million in 2024, driven by reduced AFF partially offset by lower depletion and depreciation and deferred income tax expense and an unrealized foreign exchange gain. Year-to-date net earnings were $278 million and $234 million in 2025 and 2024, respectively, whereby lower AFF was more than offset by lower depletion and depreciation and deferred income tax expense and an unrealized foreign exchange gain.

Operational Results

Bitumen production averaged 63,502 barrels per day, at a 2.38 steam-oil ratio ("SOR"), during the second quarter of 2025 and 83,253 barrels per day, at a 2.31 SOR, during the first half of 2025. This compares to 100,531 barrels per day, at a 2.44 SOR, and 102,309 barrels per day, at a 2.40 SOR, in the same periods of 2024. Production in the first half of 2025 was primarily impacted by planned turnaround activities. In addition, wildfire damage to third-party power line infrastructure delayed the scheduled post-turnaround production ramp-up. The lower SOR reflects improved reservoir quality and optimized design of recent wells partially offset by the impact of the planned turnaround.

Non-energy operating costs were $53 million and $106 million , respectively, in the three and six months ended June 30, 2025 compared to $48 million and $98 million in the same periods of 2024, primarily reflecting higher planned maintenance and unexpected wildfire costs. Lower 2025 bitumen sales volumes also contributed to a per barrel increase.

Capital expenditures were $200 million and $357 million in the three and six months ended June 30, 2025 , respectively, compared to $123 million and $235 million in the same periods of 2024, primarily reflecting planned turnaround activities and FEP investments.

Capital Allocation Strategy

The Corporation is committed to returning 100% of free cash flow to shareholders through a combination of share repurchases and payment of quarterly base dividends while maintaining balance sheet quality and managing working capital requirements.

During the first half of 2025, the Corporation repurchased and cancelled 7.1 million shares under its normal course issuer bid ("NCIB") program at a weighted-average price of $23.66 per share, totaling $168 million . As a result of the Strathcona Resources Ltd. ("Strathcona") unsolicited offer, and in accordance with applicable securities laws, the Corporation has paused all share repurchases under its NCIB program.

On July 31, 2025 , the Corporation's Board of Directors approved a 10% increase in the quarterly cash dividend to $0.11 per share, reflecting the Corporation's commitment to consistent and long-term dividend growth. This dividend will be paid on October 15, 2025 to shareholders of record on September 12, 2025 .

Outlook

The Corporation's 2025 operating and capital guidance released on November 25, 2024 remains unchanged.

Take-Over Offer

On May 30, 2025 , an unsolicited take-over offer was made by Strathcona to acquire all MEG's issued and outstanding shares. The Corporation's Board of Directors has unanimously recommended that shareholders reject the offer by taking no action and not tendering their shares. A Directors' Circular, filed on June 16, 2025 , provides information for MEG shareholders about MEG's prospects and the Board's analysis, deliberations and recommendations at www.megenergy.com/offer and on www.sedarplus.ca . Additional information can be found in the Investor Presentation, which is available at www.megenergy.com/offer .

Strategic Review

With a focus on value maximization for Shareholders, the Board has authorized a strategic review of alternatives with the potential to surface an offer superior to MEG's compelling standalone plan. BMO Capital Markets, the Board's financial advisor, has begun an outreach to potential parties to solicit interest in an alternative transaction.

Adjusted Funds Flow Sensitivity

MEG's production is composed entirely of crude oil, and AFF is highly correlated with crude oil benchmark prices and light-heavy oil differentials. The following table provides an annual sensitivity estimate to the most significant market variables.

| (1) | Each sensitivity is independent of changes to other variables. | | (2) | Assumes mid-point of 2025 production guidance, US$70.00/bbl WTI, ~US$13.00/bbl Edmonton/PADD II WTI:WCS discount, C$1.35/US$ F/X rate, condensate purchased at 100% of WTI, and one bbl of bitumen per 1.42 bbls of blend sales (1.42 blend ratio). | | (3) | Assumes 1.3 GJ/bbl of bitumen, 64% of 150 MW of power generation sold externally and a 25.0 heat rate (every $0.50/GJ change in AECO natural gas price changes the power price by C$12.50/MWh). |

Conference Call

MEG's management will hold a conference to review MEG's second quarter 2025 results on August 1, 2025 , at 6:30 a.m. Mountain Time ( 8:30 a.m. Eastern Time ). To participate, please dial the North American toll-free number 1-800-715-9871, or the international call number 1-647-932-3411.

A recording of the call will be available by 12:00 p.m. Mountain Time ( 2:00 p.m. Eastern Time ) on the same day at https://www.megenergy.com/investors/presentations-events/ .

ADVISORY

Basis of Presentation

MEG prepares its financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS Accounting Standards") and presents financial results in Canadian dollars ($ or C$), which is the Corporation's functional currency.

Non-GAAP and Other Financial Measures

Certain financial measures in this news release are non-GAAP financial measures or ratios, supplementary financial measures and capital management measures. These measures are not defined by IFRS and, therefore, may not be comparable to similar measures provided by other companies. These non-GAAP and other financial measures should not be considered in isolation or as an alternative for measures of performance prepared in accordance with IFRS.

Adjusted Funds Flow and Free Cash Flow

AFF and FCF are capital management measures defined in the Corporation's consolidated financial statements and are presented to assist management and investors in analyzing operating performance and cash flow generating ability. Net cash provided by (used in) operating activities is an IFRS measure in the Corporation's consolidated statement of cash flow. AFF is calculated as net cash provided by (used in) operating activities before the net change in non-cash working capital items and excludes items not considered part of ordinary continuing operating results. By excluding non-recurring adjustments, the AFF measure provides a meaningful metric for management and investors by establishing a clear link between the Corporation's cash flows and cash operating netback. FCF is calculated as adjusted funds flow less capital expenditures. FCF is presented to assist management and investors in analyzing performance by the Corporation as a measure of financial liquidity and the capacity of the business to return capital to shareholders.

The following table reconciles Net cash provided by (used in) operating activities to AFF and FCF:

| | Three months ended June 30 | Six months ended June 30 | | | | ($millions) | 2025 | 2024 | 2025 | 2024 | | Net cash provided by operating activities | $ 329 | $ 267 | $ 625 | $ 584 | | Net change in non-cash working capital items | (210) | 87 | (126) | 99 | | Costs related to unsolicited offer | 6 | — | 6 | — | | Adjusted funds flow | 125 | 354 | 505 | 683 | | Capital expenditures | (200) | (123) | (357) | (235) | | Free cash flow | $ (75) | $ 231 | $ 148 | $ 448 |

Cash Operating Netback

Cash operating netback is a non-GAAP financial measure, or ratio when expressed on a per barrel basis. Its terms are not defined by IFRS and, therefore, may not be comparable to similar measures provided by other companies. This non-GAAP financial measure should not be considered in isolation or as an alternative for measures of performance prepared in accordance with IFRS.

Cash operating netback is a financial measure widely used in the oil and gas industry as a supplemental measure of a company's efficiency and its ability to generate cash flow for debt repayment, dividends, capital expenditures, or other uses. The per barrel calculation of cash operating netback is based on bitumen sales volumes.

Revenues is an IFRS measure in the Corporation's consolidated statement of earnings and comprehensive income which is the most directly comparable primary financial statement measure to cash operating netback. A reconciliation from revenues to cash operating netback has been provided below:

| | Three months ended June 30 | Six months ended June 30 | | | | ($millions) | 2025 | 2024 | 2025 | 2024 | | Revenues | $ 757 | $ 1,373 | $ 1,919 | $ 2,737 | | Diluent expense | (287) | (412) | (745) | (868) | | Transportation and storage expense | (158) | (147) | (324) | (277) | | Purchased product | (73) | (341) | (103) | (645) | | Operating expenses | (76) | (66) | (158) | (152) | | Realized loss on commodity risk management | — | (8) | — | (12) | | Cash operating netback | $ 163 | $ 399 | $ 589 | $ 783 |

Blend Sales and Bitumen Realization

Blend sales and bitumen realization are non-GAAP financial measures, or ratios when expressed on a per barrel basis, and are used as measures of the Corporation's marketing strategy by isolating petroleum revenue and costs associated with its produced and purchased products and excludes royalties. Their terms are not defined by IFRS and, therefore, may not be comparable to similar measures provided by other companies. These non-GAAP financial measures should not be considered in isolation or as an alternative for measures of performance prepared in accordance with IFRS. Blend sales per barrel is based on blend sales volumes and bitumen realization per barrel is based on bitumen sales volumes.

Revenues is an IFRS measure in the Corporation's consolidated statement of earnings and comprehensive income, which is the most directly comparable primary financial statement measure to blend sales and bitumen realization. A reconciliation from revenues to blend sales and bitumen realization has been provided below:

| | Three months ended June 30 | Six months ended June 30 | | | | | | | | | 2025 | 2024 | 2025 | 2024 | | | | | | ($millions, except as indicated) | | $/bbl | | $/bbl | | $/bbl | | $/bbl | | Revenues | $ 757 | | $ 1,373 | | $ 1,919 | | $ 2,737 | | | Power and transportation revenue | (6) | | (10) | | (17) | | (36) | | | Royalties | 68 | | 162 | | 176 | | 290 | | | Petroleum revenue | 819 | | 1,525 | | 2,078 | | 2,991 | | | Purchased product | (73) | | (341) | | (103) | | (645) | | | Blend sales | 746 | $ 80.64 | 1,184 | $ 98.02 | 1,975 | $ 87.63 | 2,346 | $ 90.30 | | Diluent expense | (287) | (9.43) | (412) | (6.91) | (745) | (8.92) | (868) | (8.50) | | Bitumen realization | $ 459 | $ 71.21 | $ 772 | $ 91.11 | $ 1,230 | $ 78.71 | $ 1,478 | $ 81.80 |

Net Transportation and Storage Expense

Net transportation and storage expense is a non-GAAP financial measure, or ratio when expressed on a per barrel basis. Its terms are not defined by IFRS and therefore may not be comparable to similar measures provided by other companies. This non-GAAP financial measure should not be considered in isolation or as an alternative for measures of performance prepared in accordance with IFRS. Per barrel amounts are based on bitumen sales volumes.

It is used as a measure of the Corporation's marketing strategy by focusing on maximizing the realized AWB sales price after transportation and storage expense by utilizing its network of pipeline and storage facilities to optimize market access.