S&P upgrades MEG Energy

Standard & Poor's said it raised the long-term corporate credit rating on MEG Energy Corp. to BB from BB- based on the company's successful track record with project execution and ability to keep debt at moderate levels during the initial stages of its in-situ oil sands steam-assisted gravity drainage development projects.

S&P also raised the company's senior secured debt outstanding to BBB- from BB+. The 1 recovery rating on the debt is unchanged.

The outlook is stable. Ratings were removed from CreditWatch with positive implications, where they were placed on June 24.

The upgrade reflects a relatively stronger financial risk profile, due to the large proportion of private equity raised since the company's inception and its recently completed initial public offering, according to the agency.

Ratings reflect the company's weak cash flow generation, below-average profitability during the initial phases of its multiyear steam-assisted gravity drainage project development and discounted realized crude oil prices, the agency said.

The company's large high-quality resource base, good visibility to long-term production growth and competitive full-cycle cost profile offset these weaknesses, the agency noted.

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