LEXPERT MAGAZINE
|
JUNE 2018 9
LEXPERT: First off, can you give me a sense
of how this deal came about?
Richard Borden, Norton Rose Fulbright
Canada LLP (for Wolf Midstream Inc.): Both
MEG and Devon were initially collectively,
and then separately, pursuing marketing
efforts to sell their respective 50-per-cent
interests in Access Pipeline. Devon's mar-
keting initiative was further advanced and
therefore Wolf Midstream Inc. was able to
acquire a 50-per-cent ownership interest in
Access Pipeline in October 2016. However,
given the synergies [which are described in
more detail below], Wolf always focused on
acquiring the remaining 50-per-cent own-
ership interest from MEG Energy Corp. if
and when the opportunity arose.
LEXPERT: How does Wolf Midstream's ac-
quisition of MEG's 50-per-cent ownership
interest in Access Pipeline and 100-per-
cent ownership interest in the Stonefell
Terminal fit into each company's overall
strategy going forward?
KayLynn Litton, Norton Rose Fulbright Can-
ada LLP (for Wolf Midstream Inc.): Owning
100 per cent of Access Pipeline gives Wolf
greater business development opportuni-
ties and operational flexibility. A key busi-
ness development opportunity for Wolf
is to expand Access Pipeline's capacity for
bitumen blend and diluent to serve third-
party customers in addition to the original
pipeline owners (Devon and MEG). In
addition, the Stonefell Terminal connects
MEG's production facilities, through the
Access Pipeline, to additional distribution
connections, serving as a launch point for
large volumes of blended products to reach
multiple markets.
Carolyn Wright, Burnet, Duckworth & Palm-
er LLP (for MEG Energy Corp.): e sale of
MEG's midstream assets to Wolf Mid-
stream enabled MEG to pay down debt in
order to pursue highly economic growth
projects. e sale also ensured protection
of MEG's competitive cost position while
satisfying its future long-term transporta-
tion and storage needs.
LEXPERT: ere were several elements to
this deal, including an amendment and
restatement of Wolf 's senior secured credit
facilities and a 30-year lease agreement for
MEG. I'd like to get a better sense of how
the deal was structured and what each
Crystal-ball Gazing
company will gain. Can you go into more
detail about that?
Borden: Wolf had an existing senior se-
cured credit facility, which was established
to fund a portion of the acquisition of 50
per cent of the Access Pipeline from Devon.
Given the similar nature of MEG's 50-per-
cent interest in the Access Pipeline, this
facility was upsized to fund a portion of
the acquisition of 50 per cent of the Access
Pipeline from MEG. Given the importance
of the Access Pipeline to MEG — this pipe-
line transports 100 per cent of their current
production to market — it was important
to preserve these transportation arrange-
ments over a lengthy term. e economic
terms of these tolling arrangements were
also a significant factor in establishing the
purchase price.
Alicia Quesnel, Burnet, Duckworth & Palmer
LLP (for MEG Energy Corp.): Prior to the
transaction, each of Wolf and MEG owned
a 50-per-cent interest in the Access Pipe-
line System. MEG owned 100 per cent of
the Stonefell Terminal. Pursuant to the
Transaction, MEG sold its 50-per-cent
interest in the Access Pipeline System to
Wolf and entered into a long-term (30-
year) transportation services agreement
(TSA) with Wolf for the provision of dilu-
ent and condensate transportation services.
Additionally, MEG sold its 100-per-cent
working interest in the Stonefell Terminal
to Wolf and entered into a long-term (30-
year) lease with Wolf for the exclusive use
of the Stonefell Terminal.
Lawyers pondered the future in negotiating Wolf and MEG's transportation services agreement
INTERVIEW BY ANN MACAULAY
Richard
Borden
Norton
Rose Fulbright
Canada LLP
(for Wolf
Midstream
Inc.)
KayLynn
Litton
Norton
Rose Fulbright
Canada LLP
(for Wolf
Midstream Inc.)
Carolyn
Wright
Burnet,
Duckworth
& Palmer LLP
(for MEG
Energy Corp.)
ON THE DEAL
Within a few short weeks, the deal teams from Wolf Midstream Inc. and MEG Energy
Corp. closed Wolf's $1.52-billion acquisition of MEG's 50-per-cent ownership interest
in Access Pipeline and its 100-per-cent ownership interest in the Stonefell Terminal.
More than just a simple purchase and sale transaction, the parties entered into a
long-term relationship that includes an initial 30-year commitment from MEG applying
to transportation services on Access Pipeline and the use of Stonefell Terminal. Such
long-term transportation services agreements (TSAs) pose complex and challenging
issues for both sides of a deal, including a great many unknown future situations.
Alicia
Quesnel
Burnet,
Duckworth
& Palmer LLP
(for MEG
Energy Corp.)
