Strathcona Resources Ltd. Announces Amended and Extended Offer to Acquire MEG Energy Corp.

2025-09-08

TSX - Toronto Stock Exchange · Oil · Bitumen · Natural Gas · Natural Gas Liquids · Canada

Canada NewsWire

CALGARY, AB , Sept. 8, 2025 /CNW/ - Strathcona Resources Ltd. (" Strathcona ") today announced a variation and extension of its previously announced take-over bid (as varied, the " Amended Offer ") for MEG Energy Corp. (TSX: MEG) (" MEG "). Under the terms of the Amended Offer, Strathcona is offering to acquire all of the issued and outstanding common shares of MEG (" MEG Shares ") not already owned by Strathcona or its affiliates for 0.80 of a common share of Strathcona (" Strathcona Share ") per MEG Share. The expiry date for the Amended Offer is 5:00 p.m. (Mountain Time) on October 20 , 2025.

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The Amended Offer equates to $30.86 per MEG Share and an 11% premium to the agreement entered into by MEG and Cenovus Energy Inc. (" Cenovus ") announced August 22, 2025 (the " MEG Board Deal ") currently valued at $27.79 per MEG Share, in each case based on the one-day volume-weighted average share prices of Strathcona and Cenovus on September 5, 2025 . The Amended Offer reflects a 10% increase to Strathcona's original offer, which was valued at $28.02 per MEG Share as of September 5, 2025 .

As previously disclosed, in the fourth quarter Strathcona intends to undertake a special distribution of $2.142 billion (the " Special Distribution ") to all holders of Strathcona Shares as a dividend or, at the election of shareholders, a return of capital. In the event the Amended Offer is successful, the Special Distribution will equate to approximately $5.22 per Strathcona Share. In the event the Amended Offer is unsuccessful, the Special Distribution will equate to approximately $10.00 per Strathcona Share, payable to existing Strathcona shareholders.

Upon completion of the Amended Offer and payment of the Special Distribution, Strathcona expects to have approximately 410 million shares outstanding and $3.0 billion in Net Debt 1 , equating to approximately 1.1x Net Debt / EBITDA 1 at US$60 WTI. Strathcona will be owned approximately 48% by Waterous Energy Fund (" WEF ") and other Strathcona insiders, 9% by other existing SCR shareholders, and 43% by existing MEG shareholders.

Contrary to claims by the MEG board of directors, WEF has a long-term view of the business and has no current plans to sell any of its Strathcona Shares. Confirming its long-term commitment to Strathcona , WEF today also announced it would be willing to enter into a mutually acceptable lock-up agreement as part of a supported transaction with the MEG board.

The MEG Board Deal is Unfair to MEG Shareholders and the Result of a Broken Sale Process

The MEG Board Deal's cash-heavy structure forces MEG shareholders to crystalize value, leaving MEG shareholders with only 4% of the future upside in their long-life asset through their ongoing ownership in Cenovus. Market reaction confirmed the highly lopsided nature of the deal, with Cenovus shares rising approximately 10% in the days following the announcement, equating to approximately $3.9 billion in market value, or approximately 56% of MEG's pre-announcement market capitalization. This reflects the third highest increase in buyer share price, and single highest increase in buyer market capitalization as a percent of target market capitalization, of all public-to-public transactions completed in Canada with an announced value greater than $500 million dollars since 2006 (102 transactions). Simply put, the MEG board now holds the distinction of agreeing to the single most lopsided deal of any Canadian public company in nearly 20 years.

This extraordinary outcome was the product of a MEG board of directors which has amongst the lowest share ownership in the Canadian oil and gas sector and a broken sale process which clearly generated little interest from other industry players and excluded Strathcona . Since making its original offer to the MEG board on April 28, 2025 , Strathcona repeatedly expressed a desire to engage with the MEG board to see if an alternative structure could be reached, including through multiple outreaches to MEG's financial advisors. In each case Strathcona was rebuffed, and MEG's financial advisors indicated Strathcona would only be permitted to participate in the sale process if it terminated its existing bid by executing a standstill agreement with MEG. In the absence of any competitive tension from Strathcona (or clearly anyone else), it is unsurprising Cenovus was able to extract such advantageous terms.

While Strathcona respects Cenovus' reasonable intentions of trying to secure a tremendous deal for its shareholders by taking advantage of these dynamics, as previously disclosed, Strathcona intends to vote its 14.2% interest in MEG against the MEG Board Deal at the special meeting of MEG shareholders scheduled for October 9, 2025 , where the MEG Board Deal requires 66 2/3% approval of MEG shareholders present in person and by proxy.

Strathcona wholeheartedly agrees with Cenovus that there are significant synergies and low-hanging fruit investment opportunities to improve operations on MEG's asset base that can only be captured by a larger, diversified SAGD operator. While Strathcona concedes that certain synergies can only be captured by an adjacent operator (such as accessing stranded lease boundary resource), substantially all the remaining synergies and investment opportunities identified by Cenovus are also available to Strathcona . Under Strathcona's Amended Offer, MEG shareholders will participate 43% in these synergies, approximately ten times the 4% participation MEG shareholders receive under the MEG Board Deal.

Key Benefits of Strathcona's Amended Offer for MEG Shareholders

1. 11% Premium to MEG Board Deal: $30.86 / MEG Share consideration under Amended Offer, versus $27.79 / MEG Share current value of MEG Board Deal ( $27.25 / MEG Share announced MEG Board Deal value).

2. Full Participation in Future Upside: 100% share consideration of Amended Offer results in 43% continued ownership for MEG shareholders, versus 4% under the MEG Board Deal; the MEG Board Deal crystallizes value, delivers almost all synergy value to Cenovus and deprives MEG shareholders of decades of future upside from a long life oil asset.

3. 25%+ Average Per Share Accretion on Key Metrics: 13% - 40% per share accretion for MEG shareholders on key metrics including Funds Flow 1 , Funds Flow less Sustaining Capex 1 , current production, and 1P NAV, while maintaining debt at ~1.1x Net Debt / EBITDA 1 at US$60 WTI, best-in-class margins per boe and best-in-class reserve life index.

Key Benefits of Strathcona's Amended Offer for SCR Shareholders

1. 10%+ Average Per Share Accretion on Key Metrics: 7% - 14% per share accretion for SCR shareholders on key metrics including Funds Flow 1 , Funds Flow less Sustaining Capex 1 , current production, and 1P NAV, while maintaining debt at ~1.1x Net Debt / EBITDA 1 at US$60 WTI, best-in-class margins per boe and best-in-class reserve life index.

2. Immediate Increase in Liquidity and Index Inclusion Eligibility: Expected immediate ~12x increase in daily trading volume to approximately $65 million per day, plus eligibility for all major Canadian equity indexes for the combined Strathcona and MEG, catalyzing passive investor demand.

Key Benefits of Strathcona's Amended Offer for Both MEG and SCR Shareholders

1. Meaningful Ownership in a Uniquely Positioned North American Oil Champion: Strathcona to be by far the largest pure-play oil company in North America which does not own mines or refineries, with best-in-class profitability, growth profile and reserve life.

2. Meaningful and Achievable Synergies: $205 million of annual synergy opportunities, including $50 million in overhead reduction opportunities, $55 million in interest savings and $100 million in operating synergy opportunities.

3. Upgrade to Investment Grade: Investment grade upgrade is expected for the combined business, confirmed based on recent discussions between Strathcona and rating agency, leading to lower cost of capital and fully unsecured capital structure.

A notice of variation, change and extension (the " Notice of Variation and Change ") with respect to the Amended Offer is expected to be mailed to registered securityholders of MEG this week and will be filed with the Canadian securities regulators on SEDAR+ under MEG's profile at www.sedarplus.ca and posted on Strathcona's website. In addition to the amended consideration offered by Strathcona , the Notice of Variation and Change will include updates to the information set forth in Strathcona's original offer and accompanying take-over bid circular of Strathcona dated May 30, 2025 (the " Original Offer to Purchase and Circular ").

MEG and Strathcona shareholders are encouraged to review an updated offer presentation posted on Strathcona's website for further details, a copy of which will be included in the Notice of Variation and Change. Full details of the Amended Offer and the related documents including, once filed, the Notice of Variation and Change, will be available on MEG's profile at www.sedarplus.ca and on Strathcona's website: https://www.strathconaresources.com/meg-energy-offer .

Shareholders who have questions or require assistance in depositing MEG Shares to the Amended Offer should contact the Information Agent, Laurel Hill Advisory Group, by email at assistance@laurelhill.com or by phone at 1-877-452-7184 (Toll-Free).

Copies of the Original Offer to Purchase and Circular are, and copies of the Notice of Variation and Change will be, available without charge on request from Strathcona by email at info@strathconaresources.com or by phone at (403) 930-3000 or by contacting Laurel Hill Advisory Group per the instructions set forth above.

About Strathcona

Strathcona is one of North America's fastest growing pure play heavy oil producers with operations focused on thermal oil and enhanced oil recovery. Strathcona is built on an innovative approach to growth achieved through the consolidation and development of long-life assets. Strathcona's common shares (symbol SCR) are listed on the Toronto Stock Exchange (TSX).

For more information about Strathcona , visit www.strathconaresources.com .

Website addresses are provided for informational purposes only and no information contained on, or accessible from, such websites is incorporated by reference in this news release unless expressly incorporated by reference.

Non-GAAP Financial Measures and Ratios

Non-GAAP financial measures and ratios are used internally by management to assess the performance of Strathcona . They also provide investors with meaningful metrics to assess Strathcona's performance compared to other companies in the same industry. However, Strathcona's use of these terms may not be comparable to similarly defined measures presented by other companies. Investors are cautioned that these measures should not be construed as an alternative to financial measures determined in accordance with generally accepted accounting principles (" GAAP ") and these measures should not be considered to be more meaningful than GAAP measures in evaluating Strathcona's performance.

The following tables include a reconciliation of the non-GAAP measures used throughout this press release to their most comparable GAAP measure. Subsequent adjustments have been made to reflect the Montney disposition, overhead and interest synergies expected to occur as a result of the combination with MEG and, in the case of funds flow, the intended Special Distribution.

" Net Debt " and " Net Debt (Post Montney Disposition) " are used by management to analyze leverage and liquidity. Net Debt is calculated as debt less cash and cash equivalents, less marketable securities (when applicable), plus unamortized debt costs. Net Debt (Post Montney Disposition) reflects Net Debt after giving effect to the Montney dispositions.

The following table summarizes "Net Debt" and "Net Debt (Post Montney Disposition)" of Strathcona , MEG and the combined business as at December 31, 2024 :

| | December 31, 2024 | | | | ($ millions) | Strathcona | MEG | Combined | | | | | | | Debt | 2,462 | 858 | 3,320 | | Cash and cash equivalents | — | (156) | (156) | | Unamortized debt costs | 25 | 6 | 31 | | Net Debt | 2,487 | 708 | 3,195 | | Adjustment for Montney Disposition | (2,719) | — | (2,719) | | Net Debt (Post Montney Disposition) | (232) | 708 | 476 |

"Net Debt to EBITDA" is a liquidity measure used by management to assess Strathcona's ability to repay debt, assuming that EBITDA remains consistent in future years. "Net Debt to EBITDA (Post Montney Disposition)" reflects Net Debt to EBITDA after giving effect to the Montney dispositions and expected synergies from the combination of Strathcona and MEG. These measures are calculated as Net Debt divided by EBITDA and Net Debt (Post Montney Disposition) divided by EBITDA (Post Montney Disposition).

The following table summarizes "EBITDA", "EBITDA (Post Montney Disposition)", "Net Debt to EBITDA" and "Net Debt to EBITDA (Post Montney Disposition)" of Strathcona , MEG and the combined business as at and for the year ended December 31, 2024 :

| | Year Ended December 31, 2024 | | | | ($ millions, unless otherwise indicated) | Strathcona | MEG | Combined | | | | | | | Oil and natural gas sales | 5,336 | 4,762 | 10,098 | | Sales of purchased products | 75 | 978 | 1,053 | | Purchased product | (75) | (958) | (1,033) | | Blending costs | (1,081) | (1,682) | (2,763) | | Royalties | (663) | (591) | (1,254) | | Production and operating | (812) | (290) | (1,102) | | Transportation and processing | (577) | (625) | (1,202) | | General and administrative | (101) | (73) | (174) | | Stock-based compensation | — | (24) | (24) | | EBITDA | 2,102 | 1,497 | 3,599 | | Adjustments for Montney dispositions | (458) | — | (458) | | Synergies - Combined Company | — | — | 75 | | EBITDA (Post Montney Disposition) | 1,645 | 1,497 | 3,217 | | | | | | | Net Debt to EBITDA | 1.17x | 0.47x | 0.88x | | Net Debt to EBITDA (Post Montney Disposition) | na | 0.47x | 0.18x |

" Funds Flow " is used by management to analyze operating performance and provides an indication of the funds generated by Strathcona's principal business to either fund operating activities, re-invest to either maintain or grow the business, make debt repayments or pay dividends. Funds Flow is derived from income adjusted for non-cash items, realized and unrealized gains and losses on risk management contracts, loss on settlement of other obligations, transaction related costs, debt extinguishment expense and other. " Funds Flow (Post Montney Disposition) " reflects Funds Flow after giving effect to the Montney dispositions, expected operating synergies from the combination of Strathcona and MEG, interest savings expected as a result of achieving an investment grade credit rating pursuant to the combination of Strathcona and MEG, and finance costs excluding amortization of debt issuance costs.

" Funds Flow less Sustaining Capex " is used by management to analyze operating performance and provides an indication of the funds generated by Strathcona's principal business to either fund operating activities, re-invest to grow the business, make debt repayments or pay dividends. Sustaining Capex represents the estimated capital expenditures required to maintain production at its current level. " Funds Flow less Sustaining Capex (Post Montney Disposition) " reflects Funds Flow less Sustaining Capex after giving effect to the Montney dispositions and expected synergies from the combination of Strathcona and MEG.

The following table summarizes "Funds Flow", "Funds Flow (Post Montney Disposition)" and "Funds Flow less Sustaining Capex (Post Montney Disposition)" of Strathcona , MEG and the combined business as at December 31, 2024 :

| | Year Ended December 31, 2024 | | | | ($ millions, unless otherwise indicated) | Strathcona | MEG | Combined | | | | | | | Income | 604 | 507 | 1,111 | | Deferred tax expense | 249 | 185 | 434 | | Depletion, depreciation and amortization | 874 | 620 | 1,494 | | Unrealized loss - foreign exchanged | 68 | 65 | 133 | | Risk management contracts | 44 | (22) | 22 | | Loss on settlement of other obligation | 4 | — | 4 | | Transaction related costs | 1 | — | 1 | | Finance costs | 88 | — | 88 | | Stock-based compensation | — | 24 | 24 | | Debt extinguishment expense | — | 7 | 7 | | Other | — | 4 | 4 | | Funds Flow | 1,932 | 1,391 | 3,322 | | Adjustments for Montney dispositions | (427) | — | (427) | | Synergies - Combined Company | — | — | 75 | | Interest Changes - Montney Disposition | 170 | — | 170 | | Interest Changes - Combined Company, Incl. Finance Synergies | — | — | (63) | | Finance expense, excl. amortization of debt issuance costs | (68) | — | (68) | | Funds Flow (Post Montney Disposition) | 1,607 | 1,391 | 3,009 | | Sustaining Capex | (499) | (453) | (952) | | Synergies - Combined Company | — | — | 40 | | Funds Flow less Sustaining Capex (Post Montney Dispositions) | 1,108 | 938 | 2,097 |

Supplementary Financial Measures

" Accretion / (Dilution) " refers to the change in per-share financial metrics resulting from a transaction, and is used by management to assess the impact of an acquisition or merger. It is calculated by comparing a company's share of the combined company's attributes versus that same company's standalone attributes prior to the transaction. The accretion / (dilution) metrics include the effect of synergies. To account for the value Strathcona and MEG shareholders are receiving in the form of the Special Distribution, all accretion / (dilution) metrics assume Strathcona and MEG shareholders re-invest their Special Distribution into Strathcona at Strathcona's share price at announcement of the offer, which would increase their combined company ownership. In addition, in calculating the accretion / (dilution) to MEG shareholders, MEG's standalone metrics have been adjusted to only reflect the percentage not held by Strathcona (85.8%). Finally, MEG standalone per-share metrics are calculated on a fully-diluted basis (inclusive of RSUs & PSUs); however, the combined business per-share metrics assume MEG's RSUs & PSUs vest upon a change of control but are cash-settled. Strathcona has no dilutive securities in its share capital.

No Offer or Solicitation

This news release is for informational purposes only and does not constitute an offer to buy or sell, or a solicitation of an offer to sell or buy, any securities. The Amended Offer to acquire MEG Shares and issue Strathcona Shares in connection therewith is made solely by, and subject to the terms and conditions set out in, the Original Offer to Purchase and Circular, the Notice of Variation and Change, and the letter of transmittal and notice of guaranteed delivery accompanying the Original Offer to Purchase and Circular (the " Offer Documents "). The Offer Documents contain important information about the Amended Offer and should be read in their entirety by MEG shareholders.

Additional Information About the Amended Offer and Where to Find It

In connection with the Amended Offer, Strathcona has filed and will file relevant materials with the U.S. Securities and Exchange Commission (the " SEC "), including a registration statement on Form F-10 (the " Registration Statement ") under the United States Securities Act of 1933, as amended, which includes the Offer Documents and other documents related to the Amended Offer. This news release is not a substitute for the Registration Statement, the Offer Documents or any other relevant documents filed, or to be filed, with the applicable Canadian securities regulatory authorities or the SEC. MEG shareholders and other interested parties are urged to read the Registration Statement, the Original Offer to Purchase and Circular, the Notice of Variation and Change, all documents incorporated by reference therein, all other applicable documents and any amendments or supplements to any such documents when they become available, because they do and will contain important information about Strathcona , MEG and the Amended Offer. The Registration Statement, Offer Documents and other materials filed or that will be filed by Strathcona with the SEC will be available electronically without charge at the SEC's website at www.sec.gov . The Registration Statement, Original Offer to Purchase and Circular, the Notice of Variation and Change, documents incorporated by reference therein and other relevant documents may also be obtained on request without charge from Strathcona by email at info@strathconaresources.com or by phone at (403) 930-3000 or Laurel Hill Advisory Group, the information agent for the Amended Offer by email at assistance@laurelhill.com or by phone at 1-877-452-7184 (Toll-Free), and will also be available electronically at www.sedarplus.ca .