TransCanada Corp. gave its strongest signal yet that it has enough demand from producers to fill the long-delayed Keystone XL pipeline with oil. Now the ball is in Nebraska's court.
While the company has long said it expected sufficient support from oil producers, TransCanada completed an open season for them to bid for space on the line last month, giving it hard data on demand.
Then, on a conference call to discuss third-quarter earnings on Thursday, Nov. 9, Royal Bank of Canada analyst Robert Kwan asked, "Is it fair to say, based on what you're seeing in terms of the submissions, that you pretty much have the volumes that you need but that obviously there are some conditions and other things that you need to work through?"
"Your comment is accurate," replied Paul Miller, head of TransCanada's liquids pipeline business, who added that the company is still evaluating issues raised by potential shippers. "We're quite encouraged by the results we have seen."
With the question of producer support mostly settled, the focus turns to a decision from regulators in Nebraska later this month on whether the pipeline can proceed. While any ruling there will almost certainly be challenged in court, a go-ahead would give TransCanada unfettered authority to begin laying pipe for the first time in its almost decade-long push to build the pipeline, which would bring more crude from Canada's oil sands to U.S. Gulf Coast refineries.
While investors may be holding their breath on Keystone, the company isn't standing still. The company posted third-quarter results on Thursday that met analysts' estimates, and said it placed the C$900 million ($708 million) Grand Rapids crude pipeline and the C$1 billion Northern Courier bitumen and diluent pipeline into service. 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, were C$1.67 billion. Analysts estimated C$1.78 billion.
TransCanada slipped 0.4 percent to C$61.69 in Toronto on Thursday. The shares have gained 1.9 percent this year, compared with an 8.3 percent decline for the S&P/TSX energy index.
Last month, the company canceled its proposed Energy East pipeline, which would have carried about 1.1 million barrels of oil a day 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 barrels a day 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.