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MEG Energy Corp.

Rating: 2-Sector Perform Target 1-Yr: C$41.00 ROR 1-Yr: 7.9%
Risk Ranking: High 2-Yr: C$47.00 2-Yr: 23.7%
Valuation: 1.0x our risked 2P+2C NAV
Key Risks to Target: Commodity prices, timing of projects, and project execution.
Unique Mix of Upside and Track Record
Event
■ We have initiated coverage on the common shares of MEG Energy
Corp. with a 2-Sector Perform rating and a $41 one-year target.
Implications
■ We believe MEG's unique combination of growth potential and
management track record makes it a core holding for oil exposure. As at
Nov. 5, the company was trading at 92% of risked NAV and 44% of unrisked
NAV, in line with peer group averages of 92% and 49%, respectively.
■ MEG's Christina Lake project has shown the fastest ramp-up to design
rates of any Steam Assisted Gravity Drainage (SAGD) project, along
with a steam-to-oil ratio (SOR) among the industry's lowest. Recent
production in the 27 Mbbl/d range is 8% above design rates and
particularly impressive after just completing a turnaround.
■ With over 6 Bbbl of recoverable resources, we believe MEG has the
potential to take production from 25 Mbbl/d to over 400 Mbbl/d.
Short-term catalysts include additional disclosure on Phase 2B at
Christina Lake and regulatory filings & resource updates.