Moody's assigns B3 to MEG Energy notes

Moody's Investors Service said it assigned a B3 rating to MEG Energy Corp.'s proposed $600 million senior notes offering due 2029.

The proceeds will be used to refinance all of the existing $600 million notes due 2024.

MEG's B2 corporate family rating is supported by: (1) bitumen production of over 85,000 bbls/day (net of royalties), with substantial reserves in key productive areas of the Athabasca oil sands region; (2) a long-lived reserve base; (3) pipeline commitments that can move up to two-thirds of MEG's blend volumes outside of Alberta but is subject to pipeline apportionment; and (4) good liquidity, Moody’s said.

MEG is constrained by: (1) its exposure to heavy oil differentials; (2) weak credit metrics in 2021 with retained cash flow to debt below 10%, which could remain weak in 2022 if there are pipeline constraints; and (3) concentration in one asset – the Christina Lake oil sands project, Moody’s noted.

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