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Financial Results

FFO in the first quarter of 2025 was $380 million compared to $329 million in the same period of 2024. The 16% increase was mainly driven by a higher cash operating netback and a lower interest expense due to reduced debt levels.

On a diluted per-share basis, FFO increased 24%, to $1.47, in the first quarter of 2025 from $1.19 in the comparative 2024 period reflecting the combined impact of increased FFO and the reduced number of shares outstanding as a result of share repurchases.

Cash operating netback increased to $46.30 per barrel during the first quarter of 2025 from $39.99 per barrel in the same period of 2024, mainly reflecting a higher bitumen realization after net transportation and storage expense and lower royalties partially offset by higher operating expenses net of power revenue.

Bitumen realization after net transportation and storage expense increased 10%, to $65.98 per barrel, in the first quarter of 2025 from $60.10 per barrel in the same period of 2024. The benefits from a US$6.64 per barrel narrower WTI:WCS differential, the positive impact of a weaker Canadian dollar, higher price realization associated with diverse market access and lower diluent expense were partially offset by a lower average WTI price and higher net transportation and storage expense.

After funding capital expenditures of $157 million, MEG generated $223 million of FCF which was used to return $185 million to shareholders. During the first quarter of 2025, the Corporation repurchased and cancelled 3% of total shares outstanding at December 31, 2024, or 6.7 million shares, for $159 million and paid $26 million of dividends.

First quarter net earnings were $211 million in 2025, compared to $98 million in 2024, driven by higher FFO, lower depletion and depreciation expense and a reduced unrealized foreign exchange loss partially offset by higher deferred income tax expense.

Operational Results

Average first quarter 2025 bitumen production was 103,224 barrels per day at 2.28 SOR, compared to 104,088 barrels per day in the same period of 2024 at a 2.37 SOR. The lower SOR reflects improved reservoir quality and optimized design of recent wells.

Per barrel non‐energy operating costs were $5.84 in the first quarter of 2025, compared to $5.18 in the same period of 2024, primarily reflecting expected increases in process treating costs and services as a result of new well pads.

Energy operating costs net of power revenue rose to $2.06 per barrel in the first quarter of 2025 from $1.19 per barrel in the comparative 2024 period. The benefit associated with a weaker AECO natural gas price was more than offset by a lower realized power price. Revenue from the sale of excess power generated by the Corporation's cogeneration facilities offset 34% of energy operating costs in the first quarter of 2025 compared to 69% in the comparative 2024 period.

Capital expenditures increased to $157 million in the first quarter of 2025, from $112 million in the same period of 2024, primarily reflecting the planned investment in the Facility Expansion Project and field and facility infrastructure costs.

Capital Allocation Strategy

The Corporation intends to return 100% of free cash flow to shareholders through a combination of share repurchases and payment of a quarterly base dividend while preserving balance sheet quality and managing working capital cash requirements.

On May 6, 2025, the Corporation's Board of Directors declared a quarterly base dividend of $0.10 per share for payment on July 15, 2025, to shareholders of record on June 16, 2025. Declaration of dividends is at the discretion of the Board of Directors. All dividends paid by MEG are designated as eligible dividends for Canadian federal income tax purposes.

On March 6, 2025, the Toronto Stock Exchange approved the renewal of the Corporation's normal course issuer bid ("NCIB"). Pursuant to the NCIB, MEG may, at its discretion, purchase and cancel up to a maximum of 22,535,791 common shares of the Corporation. The NCIB became effective on March 11, 2025, and will terminate on March 10, 2026 or such earlier time as the NCIB is completed or terminated at the option of MEG.

Outlook

The Corporation's 2025 operating and capital guidance released on November 25, 2024 remains unchanged.

Funds from Operations Sensitivity

MEG's production is composed entirely of crude oil, and FFO 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.

Conference Call

A conference call will be held to review MEG's first quarter 2025 results on May 7, 2025, at 6:30 a.m. Mountain Time (8:30 a.m. Eastern Time). To participate, please dial the North American toll-free number 1-888-510-2154, or the international call number 1-437-900-0527.

A recording of the call will be available by 12:00 p.m. Mountain Time (2:00 p.m. Eastern Time) on the same day at https://www.megenergy.com/investors/presentations-events/.

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.

Funds from Operations and Free Cash Flow

Funds from operations and free cash flow are capital management measures and are defined in the Corporation's consolidated financial statements. Funds from operations and free cash flow 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. Funds from operations is calculated as net cash provided by (used in) operating activities before the net change in non-cash working capital items. Free cash flow 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. Free cash flow is calculated as funds from operations less capital expenditures.

The following table reconciles Net cash provided by (used in) operating activities to FFO and FCF:

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:

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:

Net Transportation and Storage Expense

Net transportation and storage expense 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. Per barrel amounts are based on bitumen sales volumes.

It is used as a measure of the Corporation's marketing strategy by focusing on maximizing the realized AWB sales price after transportation and storage expense by utilizing its network of pipeline and storage facilities to optimize market access.

Transportation and storage expense is an IFRS measure in the Corporation's consolidated statements of earnings and comprehensive income.

Power and transportation revenue 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 transportation revenue. A reconciliation from power and transportation revenue to transportation revenue has been provided below.

Bitumen Realization after Net Transportation and Storage Expense

Bitumen realization after net transportation and storage expense 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. Per barrel amounts are based on bitumen sales volumes.

It is used as a measure of the Corporation's marketing strategy by focusing on maximizing the realized AWB sales price after net transportation and storage expense by utilizing its network of pipeline and storage facilities to optimize market access.

Operating Expenses net of Power Revenue and Energy Operating Costs net of Power Revenue

Operating expenses net of power revenue and energy operating costs net of power revenue are both non-GAAP financial measures, or ratios when expressed on a per barrel basis. 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. Per barrel amounts are based on bitumen sales volumes.

Operating expenses net of power revenue is used as a measure of the Corporation's cost to operate its facilities at the Christina Lake project after factoring in the benefits from selling excess power to offset energy costs.

Energy operating costs net of power revenue is used to measure the performance of the Corporation's cogeneration facilities to offset energy operating costs.

Non-energy operating costs and energy operating costs are supplementary financial measures as they represent portions of operating expenses. Non-energy operating costs comprise production-related operating activities and energy operating costs reflect the cost of natural gas used as fuel to generate steam and power. Per barrel amounts are based on bitumen sales volumes.

Operating expenses is an IFRS measure in the Corporation's consolidated statement of earnings and comprehensive income. Power and transportation revenue 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 power revenue. A reconciliation from power and transportation revenue to power revenue has been provided below.

Forward-Looking Information

Certain statements contained in this news release may constitute forward-looking statements within the meaning of applicable Canadian securities laws. These statements relate to future events or MEG's future performance. All statements other than statements of historical fact may be forward-looking statements. The use of any of the words "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "believe", "plan", "intend", "target", "potential" and similar expressions are intended to identify forward-looking statements.

Forward-looking statements are often, but not always, identified by such words. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. In particular, and without limiting the foregoing, this press release contains forward looking statements with respect to: the Corporation's 2025 operating and capital guidance, including its expectations regarding 2025 annual average production, capital expenditures and non-energy operating costs; the Corporation's intent to return 100% of free cash flow to shareholders through a combination of share repurchases and payment of a quarterly base dividend, subject to approval of the Board of Directors; and the Corporation's funds flow sensitivity estimates.

Forward-looking information contained in this press release is based on management's expectations and assumptions regarding, among other things: future crude oil, bitumen blend, natural gas, electricity, condensate and other diluent prices, differentials, the reaction of heavy oil differentials in response to increased Canadian pipeline capacity; foreign exchange rates and interest rates; the recoverability of MEG's reserves and contingent resources; MEG's ability to produce and market production of bitumen blend successfully to customers; future growth, results of operations and production levels; future capital and other expenditures; revenues, expenses and cash flow; operating costs; reliability; continued liquidity and runway to sustain operations through a prolonged market downturn; MEG's ability to reduce or increase production to desired levels, including without negative impacts to its assets; anticipated reductions in operating costs as a result of optimization and scalability of certain operations; anticipated sources of funding for operations and capital investments; plans for and results of drilling activity; the regulatory framework governing royalties, land use, taxes and environmental matters, including  federal and provincial climate change policies, in which MEG conducts and will conduct its business; and business prospects and opportunities. By its nature, such forward-looking information involves significant known and unknown risks and uncertainties, which could cause actual results to differ materially from those anticipated.

These risks and uncertainties include, but are not limited to, risks and uncertainties related to: the oil and gas industry, for example, the securing of adequate access to markets and transportation infrastructure (including pipelines and rail) and the commitments therein; the availability of capacity on the electricity transmission grid; the uncertainty of reserve and resource estimates; the uncertainty of estimates and projections relating to production, costs and revenues; support for protectionism and rising anti-globalization sentiment in the United States and other countries; enacted and proposed export and import restrictions, including but not limited to tariffs, export taxes or curtailment on exports; health, safety and environmental risks, including public health crises and any related actions taken by governments and businesses; legislative and regulatory changes to, amongst other things, tax, land use, royalty and environmental laws and production curtailment; the cost of compliance with current and future environmental laws, including climate change laws; risks relating to increased activism and public opposition to fossil fuels and oil sands; the inability to access government support to industry to assist in the achievement of ESG goals; assumptions regarding and the volatility of commodity prices, interest rates and foreign exchange rates; commodity price, interest rate and foreign exchange rate swap contracts and/or derivative financial instruments that MEG may enter into from time to time to manage its risk related to such prices and rates; timing of completion, commissioning, and start-up, of MEG's turnarounds; the operational risks and delays in the development, exploration, production, and the capacities and performance associated with MEG's projects; MEG's ability to reduce or increase production to desired levels, including without negative impacts to its assets; MEG's ability to finance capital expenditures; MEG's ability to maintain sufficient liquidity to sustain operations through a prolonged market downturn; changes in credit ratings applicable to MEG or any of its securities; actions taken by OPEC+ in relation to supply management; the impact of the Russian invasion of Ukraine and associated sanctions on commodity prices; the availability and cost of labour and goods and services required in the Corporation's operations, including inflationary pressures; supply chain issues including transportation delays; the cost and availability of equipment necessary to our operations; and changes in general economic, market and business conditions.

Although MEG believes that the assumptions used in such forward-looking information are reasonable, there can be no assurance that such assumptions will be correct. Accordingly, readers are cautioned that the actual results achieved may vary from the forward-looking information provided herein and that the variations may be material. Readers are also cautioned that the foregoing list of assumptions, risks and factors is not exhaustive.

Further information regarding the assumptions and risks inherent in the making of forward-looking statements can be found in MEG's most recently filed Annual Information Form ("AIF"), along with MEG's other public disclosure documents. Copies of the AIF and MEG's other public disclosure documents are available through the Company's website at www.megenergy.com/investors and through the SEDAR+ website at www.sedarplus.ca.

The forward-looking information included in this news release is expressly qualified in its entirety by the foregoing cautionary statements. Unless otherwise stated, the forward-looking information included in this news release is made as of the date of this news release and MEG assumes no obligation to update or revise any forward-looking information to reflect new events or circumstances, except as required by law.

This news release contains future-oriented financial information and financial outlook information (collectively, "FOFI") about MEG's prospective results of operations including, without limitation, the Corporation's AFF based on certain market variables, all of which are subject to the same assumptions, risk factors, limitations, and qualifications as set forth above. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on FOFI. MEG's actual results, performance or achievement could differ materially from those expressed in, or implied by, these FOFI, or if any of them do so, what benefits MEG will derive therefrom. MEG has included the FOFI in order to provide readers with a more complete perspective on MEG's future operations, and the factors that could affect such operations, and such information may not be appropriate for other purposes. MEG disclaims any intention or obligation to update or revise any FOFI statements, whether as a result of new information, future events or otherwise, except as required by law.

About MEG

MEG is the leading pure-play in situ thermal oil producer in Canada. Our purpose is to meet the growing demand for energy, produced safely and reliably, while generating long-term value for all our stakeholders. MEG produces, transports and sells our oil (AWB) to customers throughout North America and internationally. Our common shares are listed on the Toronto Stock Exchange under the symbol "MEG" (TSX: MEG).

Learn more at: www.megenergy.com

For further information, please contact:

Investor Relations
T 403.767.0515
E invest@megenergy.com

Media Relations
T 403.775.1131
E media@megenergy.com

SOURCE MEG Energy Corp.

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