They are both ambitious players in Alberta's oil sands, each with a huge need for capital.
They both have state-owned Chinese backers. One staged a jaw-dropping $1.3-billion initial public offering, the other is attempting a financing on that same massive scale.
For all their similarities, everyone connected with MEG Energy was going out of their way on Tuesday to stress the differences between this 11 year-old company and Athabasca Oil Sands, which is down more than 40 per cent since its debut in April, and qualifies as one of the poorest performing IPOs ever seen in Canadian markets.
The mantra repeated by MEG executives is that with all due respect to their oil sands colleagues, they have learned from Athabasca's debut this spring.
So how do MEG and its bankers distinguish their offering from a peer that's been a wealth destroyer for investors? Credit Suisse Securities, BMO Nesbitt Burns, Barclays Capital and Morgan Stanley Canada have the honour of leading a transaction that will be pitched to a global audience. MEG has hired law firm Bennett Jones on the financing, while the underwriters are using law firm Blake, Cassels & Graydon.
First, MEG and its bankers will gently will urge the Street to temper the criticism of Athabasca, noting that IPO came just as the market set a peak for this year - the TSX oil and gas index dropped 9 per cent in the month that followed. So Athabasca's offering was well timed for the company, but a nightmare for investors. In a more volatile market, the one we're living now, the dynamic should favour investors.
Then this marketing campaign will move to the obvious: MEG is a far more mature entity. The Calgary-based company produces 25,000 barrels a day, with plans to more than double production within three years - hence the need for capital. MEG lost $485,000 on revenues of $126-million in the most recent quarter - the three months ended March 31.
Athabasca, on the other hand, doesn't expect to start commercial production of oil until 2014.
Next will come the distinctions of geography and geology. MEG is working properties that are cheek-to-cheek with established projects owned by Cenovus Energy. MEG's reserves can be exploited with proven steam-assisted gravity drainage systems.
Engineers throw around a concept called steam-to-oil ratios, to measure the efficiency of drilling that strips oil out of the ground. MEG ranks as one of the cheaper plays in the region, along with Cenovus. Companies such as OPTI and Connacher are at the other end of the spectrum, facing far greater expenses as they gather oil. And Athabasca holds a scattered collection, in different geological regions of Alberta. That adds to development costs.
Finally, MEG's backers will point out the subtle difference in the way these two companies conducted themselves over the recent years. At this point, they may pull out a blue-chip endorsement from MEG director Peter Lougheed, former premier of Alberta and a respected name in energy.
Athabasca attracted a head-turning $1.9-billion investment from PetroChina last year, and handed out much of that cash to its owners in a dividend, prior to going public. While the payout was all disclosed, it raised eyebrows in a capital-intensive sector.
MEG, on the other hand, plows all its dough into expansion. Founder and CEO William McCaffrey and his team tapped some of the deepest pockets on the planet for capital. None of these investors are selling into the IPO, and MEG can now use their backing as a calling card in its capital campaign.
Private equity fund Warburg Pincus, which has put $35-billion into 600 companies over the past four decades, became a major backer early in this decade, and now owns 24 per cent of MEG.
In 2005, China National Offshore Oil Co., or CNOOC, paid $150-million for a 17-per-cent stake in MEG. Sources say that these two global backers have in turn attracted a number of "brand name" sovereign wealth funds.
By spending their cash on operations, and delivering on production promises, Mr. McCaffrey has made MEG a far more credible player than most companies taking their first steps on public markets.