Mr. Bill McCaffrey reports

MEG ENERGY REPORTS STRONG THIRD QUARTER PRODUCTION, RECORD LOW NON-ENERGY OPERATING COSTS AND REDUCED CAPITAL SPENDING

MEG Energy Corp. has released its third quarter 2016 operating and financial results. Highlights include:

• Near-record production volumes of 83,404 barrels per day (bpd);
• Cash flow from operations of $23-million, or 10 cents per share;
• Record-low non-energy operating costs of $5.32 per barrel, supporting net operating costs of $7.76 per barrel;
• Record-low general and administrative expenses of $2.94 per barrel, a 21-per-cent reduction from the third quarter of 2015;
• Reduced 2016 non-energy operating cost guidance to $5.75 to $6.50 per barrel, approximately 16 per cent below the original estimate of $6.75 to $7.75 per barrel;
• The 2016 capital program has been revised downward to $140-million from the original budget of $328-million, while maintaining production guidance;
• Solid financial liquidity, exiting the quarter with $103-million of cash and cash equivalents, and an undrawn $2.5-billion (U.S.) revolving credit facility.

"Our quarterly results are a demonstration of MEG's increasing capacity to sustain the company in a challenging commodity price environment, through continued technological advancement and reductions in our overall cost base," said Bill McCaffrey, president and chief executive officer. "We are seeing record-low per-barrel non-energy operating and general and administrative costs. These cost reductions were supported by third quarter production levels which are the second best in MEG's history."

MEG recorded production of 83,404 bpd in the third quarter of 2016, compared with production of 82,768 bpd in the third quarter of 2015. MEG expects to meet its 2016 production guidance of 80,000 to 83,000 bpd.

Related net operating costs for the third quarter were $7.76 per barrel compared with $9.10 per barrel in the third quarter of 2015. Non-energy operating costs (which exclude natural gas consumption) were $5.32 per barrel, an 11-per-cent improvement from the same period in 2015. The significant decrease in net operating costs reflects the continuing efficiency gains from the application of eMSAGP, which is being fully deployed across the company's phase 2 operations. Net operating costs also benefited from a decrease in the usage and cost of natural gas used to fuel the company's SAGD facilities. MEG's steam-to-oil ratio (SOR) averaged 2.2 during the third quarter of 2016, compared with an SOR of 2.5 for the third quarter of 2015.

High production volumes and low operating, general and administrative costs contributed to cash flow from operations of $23-million for the third quarter of 2016, despite the current commodity price environment. Cash flow from operations was relatively stable from $24-million in the third quarter of 2015.

MEG recognized an operating loss of $88-million for the third quarter of 2016, compared with an operating loss of $87-million in the same period of 2015.

At the end of the third quarter, MEG had $103-million of cash and cash equivalents on hand. At current strip prices, MEG anticipates its $2.5-billion (U.S.) revolving credit facility will remain undrawn at the end of 2016.

Capital investment for the third quarter totalled $19-million, bringing total capital invested for 2016 to date to $74-million. As a result of the continuing efficiency gains achieved through the application of eMSAGP, MEG anticipates it will achieve its sustaining and maintenance, marketing, and other initiatives in 2016 with an investment of $140-million, 18 per cent below the reduced capital investment of $170-million announced in April.

"We are continuing to make incremental reductions in costs across the business," said Mr. McCaffrey. "Our advances in technology have enabled MEG to increase production while reducing our capital and operating costs."

Operational and financial highlights

The table summarizes selected operational and financial information of the corporation for the periods noted.

                       OPERATIONAL AND FINANCIAL HIGHLIGHTS
                        (In millions, except as indicated)

                               Nine months ended
                                        Sept. 30,
                                   2016     2015  Q3 2016  Q2 2016  Q1 2016

Bitumen production -- bbl/d      81,065   78,849   83,404   83,127   76,640
Bitumen realization -- $/bbl     $24.91   $33.20   $30.98   $30.93   $11.43
Net operating costs -- $/bbl       7.89     9.69     7.76     7.43     8.53
Non-energy operating costs --
$/bbl                              5.83     6.84     5.32     5.81     6.45
Cash operating netback --
$/bbl                             10.18    18.01    16.74    16.09    (3.71)
Cash flow from (used in)
operations                         (102)      94       23        7     (131)
Per share, diluted                (0.45)    0.42     0.10     0.03    (0.58)
Operating earnings (loss)          (383)    (234)     (88)     (98)    (197)
Per share, diluted                (1.70)   (1.04)   (0.39)   (0.43)   (0.88)
Revenue                           1,301    1,481      497      513      290
Net earnings (loss)(1)             (124)    (872)    (109)    (146)     131
Per share, basic                  (0.55)   (3.89)   (0.48)   (0.65)    0.58
Per share, diluted                (0.55)   (3.89)   (0.48)   (0.65)    0.58
Total cash capital
investment                           74      203       19       20       35
Cash and cash equivalents           103      351      103      153      125
Long-term debt                    4,910    5,024    4,910    4,871    4,859

                                Q4 2015  Q3 2015  Q2 2015  Q1 2015  Q4 2014

Bitumen production -- bbl/d      83,514   82,768   71,376   82,398   80,349
Bitumen realization -- $/bbl     $23.17   $31.03   $44.54   $25.82   $50.48
Net operating costs -- $/bbl       8.52     9.10     9.43    10.49    10.13
Non-energy operating costs --
$/bbl                              5.66     5.98     7.01     7.57     6.42
Cash operating netback --
$/bbl                              9.05    16.41    29.64     9.83    35.56
Cash flow from (used in)
operations                          (44)      24       99      (30)     134
Per share, diluted                (0.20)    0.11     0.44    (0.13)    0.60
Operating earnings (loss)          (140)     (87)     (23)    (124)       8
Per share, diluted                (0.62)   (0.39)   (0.10)   (0.56)    0.04
Revenue                             445      460      555      467      615
Net earnings (loss)(1)             (297)    (428)      63     (508)    (150)
Per share, basic                  (1.32)   (1.90)    0.28    (2.27)   (0.67)
Per share, diluted                (1.32)   (1.90)    0.28    (2.27)   (0.67)
Total cash capital
investment                           54       32       90       80      324
Cash and cash equivalents           408      351      438      471      656
Long-term debt                    5,190    5,024    4,678    4,759    4,350

(1) Includes a net unrealized foreign exchange loss of $38.7-million and a
net unrealized foreign exchange gain of $267.8-million on the corporation's
U.S.-dollar-denominated debt and U.S.-dollar-denominated cash and cash
equivalents for the three and nine months ended Sept. 30, 2016,
respectively. The net losses for the three and nine months ended Sept. 30,
2015, include net unrealized foreign exchange losses of $330.5-million and
$626.3-million, respectively.

We seek Safe Harbor.