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by Stockwatch Business Reporter

West Texas Intermediate crude for September delivery added 31 cents to $41.45 on the New York Merc, while Brent for September lost 24 cents to $42.46 (all figures in this para U.S.). Western Canadian Select traded at a discount of $14.60 to WTI ($26.85), unchanged. Natural gas for September added 0.3 cent to $2.86. The TSX energy index added 1.27 points to close at 188.40.

Oil sands producer MEG Energy Corp. (MEG) added 10 cents to $5.53 on 2.34 million shares, finally reversing the slide that has seen it drop from over $6.50 in the last week and a half. Investors had evidently waited with trepidation for the company's second quarter financials, which arrived yesterday morning, preceding another 28-cent drop in the share price. Although quarterly production of 83,127 barrels a day was in line with analysts' predictions, cash flow of three cents a share was below predictions of five cents and the operating loss of 43 cents a share was significantly worse than predictions of 27 cents. There was some good news amid the gloom. MEG has pushed its operating costs down to $7.43 a barrel, down from $9.43 a year earlier and $13.63 a year before that. Much of the improvement is thanks to technology, such as MEG's eMSAGP (enhanced modified steam and gas push), which essentially lets the company produce more barrels of bitumen using the same amount of steam. MEG began an eMSAGP pilot in late 2011 and has now implemented the technology across about one-third of its production base. Thanks in part to the technology, MEG's production averaged over 86,000 barrels a day during May and June -- "nearly 87,000," emphasized management in a conference call yesterday -- and the company expects to achieve its goals for the year while spending just $140-million. This compares with a budget of $170-million. MEG is not actually lowering its budget, however, and says it will likely direct the $30-million savings toward "growth projects." This is the point at which many investors' smiles may have faded. At current commodity prices, any expansion projects will struggle to meet economic hurdles, so many investors may have preferred that the savings go toward reducing MEG's $4.7-billion net debt. The debt does not start maturing until 2020, but even so, it is a daunting number next to MEG's market cap of $1.2-billion.

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