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MEG Energy To Sell Access Pipeline And Stonefell Terminal For $1.61 Bln

MEG Energy Corp. (MEG.TO) said it has entered into an agreement with Wolf Midstream Inc. for the sale of the company's 50 percent interest in Access Pipeline and 100 percent interest in Stonefell Terminal for cash and other consideration of $1.61 billion, representing 13.4 times 2018 annualized EBITDA.

The transaction comprises the sale of Access Pipeline for total consideration of $1.4 billion, and the sale of Stonefell for $210 million. The transaction is expected to close in the first quarter of 2018.

MEG Energy said it will receive $1.52 billion in cash at closing, and a credit of $90 million toward future expansions of Access Pipeline whereby the company will not pay incremental tolls to fund such expansions.

As part of the transaction, MEG Energy and Wolf have entered into a Transportation Services Agreement or TSA, dedicating MEG's Christina Lake production and condensate transport to Access Pipeline for an initial term of 30 years.

In addition, under the TSA, commercial parameters have been established for the conversion of Access Pipeline's 16" unutilized pipeline to transport natural gas liquids.

Upon closing, MEG Energy will use the net cash proceeds from the transaction to repay about C$1.225 billion of MEG's senior secured term loan and to fully fund the company's $275 million highly economic 13,000 bpd brownfield expansion at the Phase 2B facility.

MEG Energy said it intends to increase its 2018 capital budget from $510 million to $700 million to fund approximately 70 percent of the Phase 2B brownfield expansion in 2018.

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