MEG Energy Delivers Record Q3 Production and Strong Third Quarter 2025 Financial Results

2025-11-10

TSX - Toronto Stock Exchange · Canada

Canada NewsWire

CALGARY, AB, Nov. 10, 2025/CNW/ - MEG Energy Corp. (TSX:MEG) ("MEG" or the "Corporation") reported its third quarter 2025 operational and financial results.1

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"Our strong third quarter results are a testament to MEG's journey as a top-tier oil sands producer, built on the dedication, expertise, and innovation of our people," said Darlene Gates, President and Chief Executive Officer. "I am deeply proud of what we have accomplished together. I want to thank our employees, partners, and the communities who have supported us throughout our journey. As we look ahead, I am confident that MEG's legacy of operational excellence and value creation will continue to thrive."

Key Highlights:

Record Q3 production: 108,166 bbls/d at a 2.27 steam-oil ratio ("SOR"), driven by strong facility performance post-turnaround and efficient ramp-up of the newest well pad. Facility Expansion Project ("FEP") on track: Completion planned in 2027, with additional steam capacity in service in 2026. The once through steam generator has been delivered to site and module fabrication commenced during the quarter. Strong adjusted funds flow ("AFF"): AFF of $368 million($1.44per share); Free Cash Flow ("FCF")of $239 million($0.93per share). Disciplined capital investment:$129 millionin capital expenditures, focused on FEP and advancing pad development into areas of improved resource quality. Shareholder capital returns: On July 31, 2025, the Board approved a 10% increase in the quarterly dividend to $0.11per share, paid on October 15, 2025, demonstrating MEG's commitment to consistent, long-term dividend growth. Stable guidance: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:

| | Nine months ended Sept 30 | 2025 | 2024 | | | | | | | | ($millions, except as indicated) | 2025 | 2024 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | | Operational results: | | | | | | | | | | | Bitumen production - bbls/d | 91,649 | 102,641 | 108,166 | 63,502 | 103,224 | 100,139 | 103,298 | 100,531 | 104,088 | | Per share, diluted | 0.10 | 0.10 | 0.04 | 0.02 | 0.04 | 0.03 | 0.04 | 0.03 | 0.03 | | Steam-oil ratio | 2.30 | 2.39 | 2.27 | 2.38 | 2.28 | 2.40 | 2.36 | 2.44 | 2.37 | | Bitumen sales - bbls/d | 89,769 | 101,324 | 96,484 | 70,760 | 102,126 | 100,821 | 105,255 | 93,140 | 105,534 | | Business environment: | | | | | | | | | | | WTI - US$/bbl | 66.70 | 77.54 | 64.93 | 63.74 | 71.42 | 70.27 | 75.09 | 80.57 | 76.96 | | Differential - WTI:WCS - Edmonton - US$/bbl | (11.11) | (15.49) | (10.39) | (10.27) | (12.67) | (12.56) | (13.55) | (13.61) | (19.31) | | AWB - Edmonton - US$/bbl | 54.69 | 60.86 | 53.58 | 52.70 | 57.77 | 56.82 | 60.62 | 65.99 | 55.96 | | | | | | | | | | | | | C$ equivalent of 1 US$ – average | 1.3986 | 1.3603 | 1.3771 | 1.3840 | 1.4350 | 1.3991 | 1.3636 | 1.3684 | 1.3488 | | Financial results: | | | | | | | | | | | Bitumen realization after net transportation

and storage expense(1)- $/bbl | 58.79 | 66.22 | 60.12 | 46.72 | 65.98 | 62.62 | 65.61 | 73.84 | 60.10 | | | | | | | | | | | | | Non-energy operating costs(2)- $/bbl | 6.12 | 5.32 | 4.94 | 8.16 | 5.84 | 5.61 | 5.18 | 5.63 | 5.18 | | Energy operating costs net of power

revenue(1)- $/bbl | 1.61 | 0.94 | 0.33 | 2.72 | 2.06 | 0.90 | 0.64 | 0.99 | 1.19 | | Operating expenses net of power

revenue(1) - $/bbl | 7.73 | 6.26 | 5.27 | 10.88 | 7.90 | 6.51 | 5.82 | 6.62 | 6.37 | | Cash operating netback(1)- $/bbl | 40.75 | 42.65 | 46.23 | 25.29 | 46.30 | 41.09 | 41.35 | 47.14 | 39.99 | | | | | | | | | | | | | Royalties | 252 | 459 | 76 | 68 | 108 | 132 | 169 | 162 | 128 | | | | | | | | | | | | | Adjusted funds flow(3) | 873 | 1,045 | 368 | 125 | 380 | 340 | 362 | 354 | 329 | | Per share, diluted | 3.40 | 3.83 | 1.44 | 0.49 | 1.47 | 1.29 | 1.34 | 1.30 | 1.19 | | Capital expenditures | 486 | 376 | 129 | 200 | 157 | 172 | 141 | 123 | 112 | | Free cash flow(3) | 387 | 669 | 239 | (75) | 223 | 168 | 221 | 231 | 217 | | Per share, diluted | 1.51 | 2.46 | 0.93 | (0.30) | 0.86 | 0.64 | 0.82 | 0.85 | 0.78 | | Weighted average common shares outstanding - diluted | 256 | 273 | 256 | 255 | 258 | 263 | 269 | 272 | 276 | | | | | | | | | | | | | Debt repayments - US$ | — | 258 | — | — | — | — | 100 | 53 | 105 | | Share repurchases - C$ | 168 | 303 | — | 9 | 159 | 151 | 108 | 68 | 127 | | Dividends paid - C$ | 78 | — | 26 | 26 | 26 | 27 | — | — | — | | | | | | | | | | | | | Revenues | 3,100 | 4,002 | 1,181 | 757 | 1,162 | 1,147 | 1,265 | 1,373 | 1,364 | | | | | | | | | | | | | Net earnings | 437 | 401 | 159 | 67 | 211 | 106 | 167 | 136 | 98 | | Per share, diluted | 1.71 | 1.47 | 0.62 | 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

Third quarter 2025 AFF increased to $368 millionfrom $362 millionin Q3 2024, as lower blend sales volumes and prices were more than offset by reduced diluent expense and royalties. On a diluted per share basis, AFF increased to $1.44from $1.34, reflecting increased AFF and share repurchases.

For the nine months ended September 30, 2025, AFF was $873 million, $172 millionlower than the same period in 2024, primarily due to lower blend sales volumes and prices partially offset by lower diluent expense and royalties. On a diluted per share basis, AFF was $3.40compared to $3.83in 2024, reflecting decreased AFF partially offset by share repurchases.

Third quarter FCF rose to $239 millionfrom $221 millionQ3 2024, reflecting higher AFF and lower capital expenditures. Year-to-date FCF declined to $387 millionin 2025, from $669 millionlast year, due to lower 2025 AFF and higher 2025 capital expenditures for the FEP and turnaround activity.

During the third quarter, $26 millionwas returned to shareholders through dividends. In light of the Strathcona Resources Ltd. ("Strathcona") unsolicited offer and the subsequent Cenovus Energy Inc. ("Cenovus") plan of arrangement, all share repurchases under the normal course issuer bid ("NCIB") were paused in accordance with applicable securities laws.

Net earnings were $159 millionin Q3 2025, compared to $167 millionin Q3 2024, primarily driven by an unrealized foreign exchange loss and transaction costs in 2025 related to the Strathconaunsolicited offer and the Cenovus plan of arrangement partially offset by lower depletion and depreciation. Year-to-date net earnings were $437 millionand $401 millionin 2025 and 2024, respectively, as lower AFF was more than offset by reduced depletion and depreciation and an unrealized foreign exchange gain.

Operational Results

Bitumen production averaged 108,166 barrels per day, at a 2.27 SOR and 91,649 barrels per day, at a 2.30 SOR, during the three and nine months ended September 30, 2025, respectively. This compares to 103,298 barrels per day, at a 2.36 SOR, and 102,641 barrels per day, at a 2.39 SOR, in the same periods of 2024. Record third quarter 2025 production reflects strong facility performance post-turnaround and efficient ramp-up of the newest well pad. Production in the nine months ended September 30, 2025was primarily impacted by planned 2025 turnaround activities and wildfire delays to the post-turnaround ramp-up. The lower 2025 SOR reflects the allocation of steam to higher quality resource and optimized well designs in recent pads partially offset by the impact of the planned turnaround.

Third quarter 2025 non-energy operating costs were $44 million, or $4.94per barrel, compared to $49 million, or $5.18per barrel in the same period of 2024.

Year-to-date non-energy operating costs were $150 million, compared to $147 millionin 2024. On a per barrel basis, 2025 non-energy operating costs rose to $6.12per barrel from $5.32per barrel in 2024 reflecting the turnaround and wildfire impacts.

Capital expenditures were $129 millionand $486 millionin the three and nine months ended September 30, 2025, respectively, compared to $141 millionand $376 millionin the same periods of 2024. The increase reflects the planned turnaround and FEP investments.

Capital Allocation Strategy

In the first half of 2025, MEG repurchased and cancelled 7.1 million shares under the NCIB program at a weighted-average price of $23.66per share, totaling $168 million. Share repurchases were suspended in May 2025following the Strathconaoffer and Cenovus arrangement.

In line with its commitment to consistent and long-term dividend growth, the Board approved a 10% increase in the quarterly dividend to $0.11per share on July 31, 2025, paid on October 15, 2025.

Outlook

2025 operating and capital guidance, as released on November 25, 2024, remains unchanged:

Cenovus Plan of Arrangement

An unsolicited take-over offer was made by Strathcona Resources Ltd. ("Strathcona") on May 30, 2025to acquire all MEG's issued and outstanding shares not already owned by Strathcona. Prior to commencing the offer, Strathconaannounced that it owned 9.2% of the outstanding MEG shares. The Corporation's Board of Directors evaluated the offer and unanimously recommended that shareholders reject the offer. A Directors' Circular was filed on June 16, 2025providing information regarding the Board's recommendations and the Board's intention to conduct a strategic review of alternatives.

On August 22, 2025, the Corporation's Board announced an arrangement agreement with Cenovus Energy Inc. ("Cenovus") pursuant to which Cenovus would acquire all the issued and outstanding MEG shares in a transaction that valued MEG at $27.25per share, with the consideration to be paid 75% in cash and 25% in Cenovus shares.

Subsequent to the announcement of the MEG and Cenovus arrangement transaction, Strathconaannounced that it had increased its ownership of MEG shares to 14.2% and on September 8, 2025, Strathconaannounced a revised offer that valued MEG at $30.86per share, with consideration comprised entirely of Strathconashares. MEG subsequently announced on September 15, 2025that the Board of Directors reaffirmed its unanimous recommendation that shareholders vote for the MEG and Cenovus arrangement transaction and to reject the revised Strathconaoffer.

On October 8, 2025, Cenovus and MEG announced an amended arrangement agreement that increased the offer price to $29.80per MEG share and altered the consideration payable by Cenovus to be 50% cash and 50% Cenovus shares. Strathconaterminated its bid to acquire MEG on October 10, 2025.

On October 27, 2025, Cenovus and MEG announced a second amended arrangement agreement that further increased the offer price to $30.00per MEG share. This improved offer price represented a 47% premium to MEG's unaffected 20-day volume-weighted share price as of May 15, 2025, the last trading day preceding the first public announcement by Strathconathat it intended to acquire MEG. Also on October 27, 2025, MEG announced that it had been advised by Cenovus that Strathconaentered into a shareholder support agreement with Cenovus pursuant to which Strathconahad agreed to vote its MEG shares in support of the MEG and Cenovus arrangement transaction at the MEG shareholder meeting to be held on October 30, 2025. The value of the Cenovus offer had increased to $30.37per MEG share based on the closing price of Cenovus shares on November 7, 2025.

The special meeting of shareholders of MEG was convened as scheduled on October 30, 2025but was adjourned, with the consent of Cenovus, to November 6, 2025in order to permit MEG to respond to a regulatory inquiry requesting additional disclosure in respect of MEG's consideration of the amended arrangement agreement entered into on October 27, 2025. MEG issued a press release on October 31, 2025providing such additional disclosure. On November 6, 2025, the special meeting of shareholders of MEG was held and the shareholders approved the arrangement between MEG and Cenovus. Closing of the transaction remains subject to the approval of the Court of King's Bench of Albertaand the Court hearing to obtain such approval is set for November 12, 2025. Assuming such approval is obtained on November 12, 2025, closing will occur shortly thereafter.

Further information can be found at www.megenergy.com/offer-updateand on www.sedarplus.ca. Additional information can be found in the Investor Presentation, which is available at www.megenergy.com/offer-update.

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). |

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 September 30 | Nine months ended September 30 | | | | ($millions) | 2025 | 2024 | 2025 | 2024 | | Net cash provided by operating activities | $ 140 | $ 441 | $ 765 | $ 1,029 | | Net change in non-cash working capital items | 203 | (79) | 77 | 16 | | Transaction Costs | 25 | — | 31 | — | | Adjusted funds flow | 368 | 362 | 873 | 1,045 | | Capital expenditures | (129) | (141) | (486) | (376) | | Free cash flow | $ 239 | $ 221 | $ 387 | $ 669 |

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 September 30 | Nine months ended September 30 | | | | ($millions) | 2025 | 2024 | 2025 | 2024 | | Revenues | $ 1,181 | $ 1,265 | $ 3,100 | $ 4,002 | | Diluent expense | (314) | (403) | (1,059) | (1,271) | | Transportation and storage expense | (171) | (171) | (495) | (448) | | Purchased product | (228) | (214) | (331) | (859) | | Operating expenses | (57) | (66) | (215) | (218) | | Realized loss on commodity risk management | — | (10) | — | (22) | | Cash operating netback | $ 411 | $ 401 | $ 1,000 | $ 1,184 |

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 September 30 | Nine months ended September 30 | | | | | | | | | 2025 | 2024 | 2025 | 2024 | | | | | | ($millions, except as indicated) | | $/bbl | | $/bbl | | $/bbl | | $/bbl | | Revenues | $ 1,181 | | $ 1,265 | | $ 3,100 | | $ 4,002 | | | Power and transportation revenue | (10) | | (10) | | (27) | | (46) | | | Royalties | 76 | | 169 | | 252 | | 459 | | | Petroleum revenue | 1,247 | | 1,424 | | 3,325 | | 4,415 | | | Purchased product | (228) | | (214) | | (331) | | (859) | | | Blend sales | 1,019 | $ 84.18 | 1,210 | $ 90.51 | 2,994 | $ 86.42 | 3,556 | $ 90.37 | | Diluent expense | (314) | (4.77) | (403) | (7.25) | (1,059) | (7.46) | (1,271) | (8.06) | | Bitumen realization | $ 705 | $ 79.41 | $ 807 | $ 83.26 | $ 1,935 | $ 78.96 | $ 2,285 | $ 82.31 |

Earlier from Cenovus Energy Inc.

MEG Announces Shareholder Approval for Cenovus Transaction 2025-11-06
MEG Energy Announces Third Quarter of 2025 Results 2025-11-04
MEG Provides Additional Information Related to the Improved Cenovus Transaction 2025-10-31