Access Pipeline Sale Helps MEG’s Cost Structure; Stock Still Overvalued
We are raising our fair value estimate for MEG Energy to CAD 5 per share from CAD 4.50. We expect the proceeds from the sale of the Access pipeline to be used to pay down CAD 1.2 billion in debt, which will drastically reduce interest expense and improve the company’s cost structure. Because of MEG’s low production base (90,000 barrels of oil per day), MEG’s high levels of interest expense impair its cost structure. The reduction in debt levels will help the company toward its goal of generating...
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