TransCanada's hurry up-and-wait Keystone XL status outweighs result

By Jim Polson on 11/9/2017

NEW YORK (Bloomberg) -- For investors, TransCanada Corp. is a hurry up-and-wait story.

The company is awaiting a key approval from regulators in Nebraska on whether the long-delayed Keystone XL oil pipeline can proceed. That would be one of the last dominos to fall in an almost decade-long push to build a pipeline to bring more crude from Canada’s oil sands to U.S. Gulf Coast refineries. In the meantime, the company posted third-quarter results that met analysts’ estimates, and said it placed two smaller conduits into service.

The Calgary-based company has completed an open season for oil producers to bid for space on Keystone XL, and will spend the remainder of the quarter reviewing the results. Nebraska regulators are expected to make a ruling on the pipeline later this month, and TransCanada has said its final decision on opening the taps hinges on those factors.

While investors may be holding their breath, the company isn’t standing still. Last quarter, TransCanada placed the C$900 million ($708 million) Grand Rapids crude pipeline and the C$1 billion Northern Courier bitumen and diluent pipeline into service, the company said in a statement Thursday. It also started shipping natural gas under new long-term, fixed price contracts on its Canadian Mainline.

On the downside, the company delayed the startup of its Leach XPress natural gas project in the U.S. to early January, instead of this month, and said it will have a $100 million increase in its capital coast due to delays on its construction schedule caused by weather.

Profit last quarter was 70 Canadian cents a share, excluding some items, matching analysts’ average projection. Earnings before interest, taxes and depreciation, and other items, was C$1.67 billion, the company said Thursday. Analysts estimated C$1.78 billion.

TransCanada slipped 0.6% to C$61.57 at 8:25 a.m. in early trading in Toronto. The shares had gained 2.3% this year through Wednesday, compared with an 8.2% decline for the S&P/TSX energy index.

Energy East

Last month, the company canceled its proposed Energy East pipeline, which would have carried about 1.1 MMbopd from Alberta and Saskatchewan to refineries and a marine-shipping terminal in eastern Canada. That move has been widely seen as increasing the commercial case for Keystone XL because western Canadian producers, denied access to those new markets, will be eager to ship more oil to the U.S.

TransCanada has pressed Alberta’s government to buy capacity on Keystone XL, seeking the same support it had pledged for Energy East. The provincial government has its own oil to sell since it collects barrels of sandy bitumen in lieu of royalties from some producers under a royalty-in-kind program. Alberta had pledged to pay to ship 100,000 bpd on Energy East, a commitment projected to have a "minimum" government cost of C$4.6 billion over 20 years, or a higher figure depending on volumes.

TransCanada also has been seeking trademarks on new company names that would reduce the emphasis on its home country. The company, which diversified heavily into the U.S. with its $10.2 billion Columbia Pipeline acquisition last year, has published the names TC Energy, TCE, Ventiv, Convergent and Northbow in the Canadian government’s trademarks journal in the past four months.

While it’s not certain that TransCanada intends to change its name, a new appellation could reflect its diversification beyond its home base and help it wipe clean negative sentiment accrued during the fight over the proposed Keystone XL. A TransCanada spokesman declined to comment on whether the company is considering changing its name and that it’s not uncommon for large companies to protect trademarks to keep future options open.


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