​How MEG Energy will spend $510 million in 2018

A wildlife crossing over pipelines at MEG Energy's Christina Lake oilsands project. Image: MEG Energy

Growing in situ oilsands producer MEG Energy has outlined a capital-spending program of $510 million for 2018, down from its $590 million budget for 2017 as work starts to wind down on a major growth project.

The company expects to reach the production milestone of 100,000 bbls/d in early 2019, positioned for future growth with application of two proprietary technologies: the proven eMSAGP process and eMVAPEX, which it is currently testing.

“If proven successful, eMVAPEX, along with eMSAGP, will form the basis for the majority of our highly-economic growth beyond 100,000 bbls/d to our permitted capacity of 210,000 bbls/d at Christina Lake,” CEO Bill McCaffrey said in a statement.

“Our 2018 capital program sets the stage for production growth of approximately 8 to 10 percent in 2019."

Here’s a look at how the $510 million will play out.

$220 million: Sustaining and maintenance

  • Drilling of new sustaining well pairs and major turnaround activities at Christina Lake Phase 2B processing facilities
  • Planned turnaround at Phase 2B is anticipated to cost $38 million and last approximately 35 days during the second quarter. This includes thorough vessel inspections as per regulatory requirements

$120 million: complete eMSAGP roll out

  • Remaining spend of $350 million project total to apply eMSAGP across all phases at Christina Lake
  • MEG says the majority of the capital will support the drilling of new well pairs, which will allow it to increase production by utilizing steam freed up by eMSAGP

$100 million: eMVAPEX testing

  • MEG is increasing its eMVAPEX testing spend in 2018 to $100 million, up from $70 million in 2017
  • To date, the company says it has implemented the technology on three well pairs and their associated infill wells with encouraging results.
  • The 2018 capital allows for the conversion to eMVAPEX of up to seven additional well pairs and associated infills, and the construction of a solvent recycling facility to test the commerciality and scalability of the technology.

$70 million: Infrastructure and other

  • MEG says that the majority of the remaining $70 million will be allocated towards field infrastructure necessary to support the company's ongoing production growth.
  • Other initiatives include marketing, regulatory and reservoir optimization capital.

Internally generated cash flow and cash on hand are expected to fund the 2018 capital program.