Under the terms of the deal, Wolf Midstream will pay C$1.4bn ($1.1bn) to acquire MEG's 50% stake in the Access pipeline, which comprises pipelines that transport blended bitumen and diluent between the Christina Lake area of Northeastern Alberta and Edmonton, Canada.

Upon completion of the deal, Wolf Midstream will completely own and operate the Access pipeline project. Wolf acquired the initial 50% stake in the project in 2016 from Devon Energy for $1.4bn.

Wolf Midstream will also pay C$210m ($166.9m) to acquire 100% stake in 900,000 barrel Stonefell oil storage terminal, which is connected to MEG’s production facilities through the Access Pipeline system.

The divestment of midstream assets is part of MEG’s plans to reduce its heavy debt, which stood at $4.6bn as of 31 December 2017. 

MEG Energy has also signed a 30-year Transportation Services Agreement (TSA) with Wolf Midstream to ship all production and condensate from its Christina Lake project on the pipeline and also use of the Stonefell Terminal.

MEG president and CEO Bill McCaffrey said: "This transaction accomplishes the objectives we set out to achieve in unlocking the value of our midstream assets.

"Our goal was to surface attractive value and terms that allow us to substantially pay down debt, pursue highly economic growth projects and ensure our future transportation and storage needs are met, all while protecting MEG's competitive cost position.

“We expect to more than offset the incremental transportation costs related to this transaction as we bring on additional barrels."

As part of the agreement, MEG Energy will receive $1.52bn in cash at closing, and a credit of $90m, which will be used for future expansions of Access Pipeline.

McCaffrey added: "With the resources and technology that are at our disposal, we have the ability to deliver low-cost, continuous growth which improves the overall profitability and sustainability of the business as we add incremental barrels."

The deal is scheduled to be completed in the first quarter of 2018 after receiving necessary regulatory approvals. 

Image: MEG Energy intends to divest midstream assets to boost its financial position. Photo: courtesy of MEG Energy Corp.