Canadian oil sands producer MEG Energy Corp said on Thursday it had agreed to sell some pipeline and storage assets in Alberta to Wolf Midstream Inc for $1.61 billion (US$1.28 billion) to pay down debt and fund its flagship project in Athabasca.
MEG said it would sell its 50 percent interest in the Access Pipeline for $1.4 billion and its full interest in the 900,000-barrel Stonefell oil storage facility for $210 million.
MEG said it will get $1.52 billion in cash when the deal closes, and a credit of $90 million toward future expansions of the Access Pipeline.
The company said it plans to use the deal proceeds to repay about $1.23 billion in senior secured term loans and the rest to fund the expansion of its Christina Lake project in Athabasca.
The bitumen miner also intends to raise its 2018 capital budget to $700 million from $510 million to fund the expansion.
BMO Capital Markets and Credit Suisse are MEG’s financial advisers, while Burnet, Duckworth and Palmer LLP and Latham & Watkins LLP gave legal advice.
MEG also reported a 48 percent jump in fourth quarter revenue, benefiting from higher volumes sold at the U.S. Gulf Coast.
MEG managed to cut its costs per barrel by nearly half in the quarter. That helped its adjusted profit of 15 cents per share blow past the expectations of analysts, who estimated the company would break even.
Update: Wolf Midstream, which formed a partnership with Canada Pension Plan Investment Board in 2015, said in a release that the acquisition will be funded by a CPPIB investment of up to $800 million and third-party debt financing.
The deal gives Wolf 100 percent ownership of the Access Pipeline, the operator of a heavy oil transportation pipeline network servicing facilities in Alberta. The Calgary midstream company acquired a 50 percent stake in 2016 from Devon Energy Corp for $1.4 billion.
(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Savio D’Souza)
(This story has been edited by Kirk Falconer, editor of PE Hub Canada)
Photo courtesy of MEG Energy Corp