Moody's confirms MEG Energy

Moody's Investors Service said it confirmed MEG Energy Corp.'s corporate family rating and $750 million delayed-draw senior first secured term loan at Ba3.

This concludes the review for downgrade, and the outlook is stable.

The review began after MEG signaled last year that it would be making proportionately sizable acquisitions of undeveloped oil sands lease acreage before reaching key performance milestones and first cash flow from its steam assisted gravity drainage oil sands development in Alberta. With heavy capital spending and no material cash flow until early 2009, the agency said it is essential for MEG to fund acquisitions almost exclusively with equity. Over the last five months, MEG issued C$950 million in common equity.

Moody's said the confirmation reflects that MEG has completed its second substantial acquisition while establishing a pattern of nearly full equity funding of such acquisitions, which has added materially to the asset coverage of the rated loan. The confirmation also reflects that phase I and phase II construction remains largely on time and that its current estimate of remaining costs are fully backed by cash on hand and committed debt funding.

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