The Canadian producer MEG Energy Corp. agreed to sell a 50% stake in the Access bitumen pipeline and 100% interest in Stonefell blend and condensate terminal to Calgary, Alberta-based Wolf Midstream Inc. for C$1.61 billion.
The consideration, which represents 13.4x of 2018 annualized EBITDA, consists of C$1.4 billion for the stake in Access Pipeline and C$210 million for Stonefell, according to a Feb. 8 news release. MEG would receive a C$1.52 billion cash payment upon deal closing and a C$90 million credit toward future expansions of Access Pipeline, such that MEG would no longer pay incremental tolls to fund the expansions.
Under the deal, MEG and Wolf Midstream entered into a transportation services agreement for an initial 30-year term dedicating MEG's Christina Lake production and condensate transport to Access Pipeline. The agreement also includes commercial parameters for the conversion of an underutilized 16-inch portion of the pipeline for NGL transport.
The two companies also signed a 30-year lease agreement for the Stonefell terminal that would provide MEG with operational control and exclusive use of the terminal's 900,000-barrel blend and condensate storage facility.
MEG plans to use the sale proceeds to repay C$1.23 billion of its senior secured term loan and fund a C$275 million brownfield expansion at one of its production facilities.
The transaction is scheduled to close in the first quarter. BMO Capital Markets and Credit Suisse are acting as financial advisers and Burnet Duckworth and Palmer LLP and Latham & Watkins LLP are acting as legal counsel to MEG.
