MEG Energy: A Strong Vote Of Confidence

MEG Energy Corp. (TSX:MEG) (“MEG” or the “Company”) is pleased to announce that it has entered into an agreement with Wolf Midstream Inc. (“Wolf”) for the sale of the Company’s 50% interest in Access Pipeline and 100% interest in Stonefell Terminal (the “Transaction”) for cash and other consideration of $1.61 billion, representing 13.4x 2018 annualized EBITDA.

MEG Energy Press Release, February 8, 2018

Finally, I have been waiting for a year. Here is what I said in March of last year:

I sold what was left of my position in MEG Energy (MEG) for a sub-50% gain. WTI at sub-$50 won’t be enough for MEG to sell its pipeline at a good price. Hence share price appreciation will be limited in the short-term.

Cadotte Capital Partners, March 13, 2017

Share appreciation was indeed nonexistent for the last year. A combination of higher oil prices and lower production costs lead Wold Midstream to finally buy the 50% interest remaining in the Access Pipeline. Wolf, a subsidiary of the CPPIB, believes MEG will be able to supply its pipeline with plenty of crude for the next 30 years.

MEG Energy got the same price than Devon Energy, despite its much smaller size. It’s a strong vote of confidence in the operations of MEG Energy. The proceeds will go to repaying some of the debt and accelerate growth plans.

Disclosure: I am long MEG. Not for republication on Seeking Alpha.

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