The 'B+' long-term corporate credit rating assigned to Calgary, Alta.-based MEG Energy Corp. (MEG) reflects the company's lack of internal cash flow generation, as it is currently in the precompletion phase of its Christina Lake oil sands project; its high leverage; the risk of cost increases on construction of its project; and its exposure to heavy oil differentials once production begins. Somewhat mitigating these constraints are the above-average reserve life index (RLI) of MEG's oil sands leases and the expected stable production profile with negligible finding costs associated with oil sands extraction. The 'BB' rating with a recovery rating of '1' assigned to MEG's proposed bank loan facilities, composed of a seven-year US$700 million secured term loan B and a
