The ratings on Calgary, Alta.-based MEG Energy Corp. 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 and '1' recovery rating on MEG's bank loan facilities indicate a high expectation for full recovery of principal in a default scenario. The bank loan facilities is composed of a seven-year
