# MEG Energy



## Maj34 (Oct 7, 2011)

A friend of mine is HEAVILY invested in this company and I've been watching it for a while; apparently the rest of Canada has been too since it's often cited as the biggest loser or gainer of the day now for the last month (depending on if it's a good or bad day).

I have very little ability to analyze stocks right now, other than comparing the P/E ratio of this small startup with the big boys.

Can anyone tell me what they think of this company? 

One thing I'm wondering about in particular is why it's so expensive. It's PE is (according to Yahoo) about 50. Suncor is 11.8, Husky is 14.3, etc. It seems like there's a huge mismatch here - to the point that I realize they're not comparable.

Is it that, as a small company poised for growth, people are paying a big premium in the hopes that their stock increases drastically? Or is it just ridiculously over priced right now?


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## officematt (Oct 16, 2011)

It's pretty solid. They have a state of the art SAGD facility that is still under construction up at Christina Lake, just down the road from where Cenovus' equally great property is. The thing with the high PE is that they are still in construction phase and not producing much, but will in the next bit of time. A good future.

PE is not a good way to compare/study energy stocks. Look at their operating cash flow as it is the best indicator.


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## protomok (Jul 9, 2012)

Hi all,

I'm considering adding MEG Energy to my RRSP (planning to hold for 5+ yrs). I'm curious what other forum members think of this stock. Here's what I'm thinking:

PROs
- They appear to be the most low cost in situ Canadian oil company I could find. They published a steam to oil ratio of 2.5, plus a pilot project showing a 1.3 SOR using a newer technology.
- They have their own power generation facility providing power, and more importantly heat for steam generation which reduces their dependency on nat gas. I'm concerned about oil sands costs increasing once we start shipping nat gas to Asia (causing nat gas prices to increase) which I believe is going to hammer Canadian oil companies.
- Solid growth plans...80000bpd by 2015 and it seems achievable.
- Stock has been beaten up over the past 2 years and it seems like a good entry point.

CONs
- No dividend
- High growth plans but not clear when these guys will be posting positive net income.

I'm thinking this is a good long term buy and hold...but without the dividend I'm not sure if I want to buy just yet. Any thoughts?


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## protomok (Jul 9, 2012)

I've been on a bit of a buying spree today and picked up some MEG at 28.40...about $2 above their all time low, couldn't resist  Just nibbling for now but will add more if oil prices continue to slide.

I like the pure play in-situ concept and I like that they seem to have some of the best in-situ technology. Based on the latest investor presentation (http://www.megenergy.com/sites/default/files/user_uploaded/images/MEG%20Energy%20Investor%20Presentation%20September%202014.pdf) they have really been ramping up their eMSAGP technology and increased their production estimate for 2014 to 65000-75000 barrels per day.

I think the stock will probably continue to get hammered if oil prices slide, but IMHO this is WAY undervalued right now due to the panic selling going on in the energy sector.

Anyone else invested in these guys?


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## gladaki (Feb 23, 2014)

protomok said:


> I've been on a bit of a buying spree today and picked up some MEG at 28.40...about $2 above their all time low, couldn't resist  Just nibbling for now but will add more if oil prices continue to slide.
> 
> I like the pure play in-situ concept and I like that they seem to have some of the best in-situ technology. Based on the latest investor presentation (http://www.megenergy.com/sites/default/files/user_uploaded/images/MEG%20Energy%20Investor%20Presentation%20September%202014.pdf) they have really been ramping up their eMSAGP technology and increased their production estimate for 2014 to 65000-75000 barrels per day.
> 
> ...



Would be interesting to see where they will bottom. Currently they are going down. Do you think after 24th Dec they will go down more..
Just wondering about your thoughts on it. Whats their all time low ?


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## protomok (Jul 9, 2012)

Hi Gladaki,

I don't think anyone really knows where the bottom is...aside from maybe the Saudis 
I'm sticking with the long term strategy, and definitely considering buying more at these levels...would be nice to bring my avg purchase price down 

Frankly I think from a long term perspective MEG was undervalued at $28 and I think they are insanely undervalued at 17.61 today...IMHO MEG < $30 is a gift to long term investors. Not sure how much lower they'll get but I'm quite confident the company will weather the current storm. I estimate these guys are commercially viable with WTI being >= ~35-45 $/barrel...and I'm very skeptical that the Saudis will let oil drop much lower than it is now. The Saudis want to disrupt high cost producers...but not at the cost of a revolt from their citizens.

Also, all of MEGs debt isn't due until 2020 or later, they don't have the burden of a dividend right now...I think they'll weather the storm just fine.


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## gladaki (Feb 23, 2014)

protomok said:


> Hi Gladaki,
> 
> I don't think anyone really knows where the bottom is...aside from maybe the Saudis
> I'm sticking with the long term strategy, and definitely considering buying more at these levels...would be nice to bring my avg purchase price down
> ...


Agree with you..MEG has lower BOE..I will get in it. Close to January when people will do their tax loss sell offs 
rest i am indexing  eseries..


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## protomok (Jul 9, 2012)

Yup, I think January would be a great entry point. I also do eSeries. Actually if it weren't for my eSeries index funds (particularly the US index TDB902) my 2014 returns would be brutal! Maybe one of these days I'll stop individual stock picks and index everything lol.


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## gladaki (Feb 23, 2014)

protomok said:


> Yup, I think January would be a great entry point. I also do eSeries. Actually if it weren't for my eSeries index funds (particularly the US index TDB902) my 2014 returns would be brutal! Maybe one of these days I'll stop individual stock picks and index everything lol.


MEG has good technology and SAGD has low cost of production. But their 22x debt as compare to cashflow is giving me shiver...


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## protomok (Jul 9, 2012)

Anyone know what's going on with MEG today? The stock is up today ~17% but my TD Waterhouse interface is saying the stock was halted earlier today, then resumed trading. Maybe takeover rumours?


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## My Own Advisor (Sep 24, 2012)

Might be buyout time...my guess as well. That's a HUGE jump considering where prices have been.


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## james4beach (Nov 15, 2012)

MEG's chart is brutally bad. If you plot MEG vs XEG it steadily under-performs (for many years), and lately it has _dramatically_ under-performed.

Any large % increases lately are just part of the pattern you naturally see when a stock is making large % declines. It's volatile; it's going up and down like crazy.

But mostly down. It's a horrible chart, guys.


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## james4beach (Nov 15, 2012)

See what I mean ... down over 17% today. *Very* volatile. Volatile means big moves up as well as down


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## protomok (Jul 9, 2012)

Haha, yep, extremely volatile..down 20.35% _today_ at the moment!

MEG is very sensitive to changes in price of oil, and yes the swings definitely go both ways. I still think these guys will weather the current low oil price environment, but there's definitely a risk of a takeover at a low ball price.


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## Fraser19 (Aug 23, 2013)

I am wondering how these guys are going to survive?
5B of debt, little cashflow when compared to debt. The SP keeps going lower and lower. I have not ever owned this stock and I am not really thinking about owning it at this time, but I am wondering what you all think of it?


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## protomok (Jul 9, 2012)

^ MEG made some big moves in January refinancing debt and issuing stock and after the changes they don't repay debt until 2023. They also started a hedging program. So I suppose I'm fairly comfortable with MEG's survival at this point.

The $5 Billion of debt is obviously an issue. Also 2016 revenue of 1.9 Billion and net loss of 429 Million, not ideal but not a company in survival mode. If anything they are focused on low cost expansion...from their last quarterly report:
“Over the next several years, we plan to grow our production to 210,000 bpd through the addition of more of these high return, short cycle 10,000 to 20,000 bpd brownfield projects,”

MEG also has high quality assets like Christina Lake, and a very competitive Steam to Oil ratio of 2.3.

Probably the safer alternative is to pick up someone like Cenovus (who might acquire MEG one day anyway!) But a Cenovus isn't going to see a 3 or 4x return like MEG potentially will. But then again if oil crashes Cenovus (unlike MEG) won't be taken over for pennies. Interesting times!


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## protomok (Jul 9, 2012)

The incredible WTI / WCS differential (currently $46 USD!) seems to be prompting M&A activity in the O&G sector.

Husky announced a hostile takeover attempt Oct 2nd, with MEG's board unsurprisingly recommending shareholders reject the takeover. Interesting times!

https://business.financialpost.com/...ejects-husky-energys-3-3-billion-takeover-bid


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