TC Energy formerly TransCanada (Symbol-TRP)

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Shakespeare
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Re: TransCanada (Symbol-TRP)

Post by Shakespeare »

TransCanada gets Keystone green light
The U.S. State Department has concluded TransCanada Corp.’s (TRP-T41.710.080.19%) Keystone XL project will not cause undue environmental impacts, paving the way for likely approval of $7-billion project after a 90-day comment period.

In a environmental impact study released Friday, the State Department said TransCanada needed to conduct more study – and possibly add more spill protection – around the Ogalla aquifer in Nebraska.
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Re: TransCanada (Symbol-TRP)

Post by Wallace »

Although development of the Keystone Pipeline has been delayed by the US decision, it has not been rejected. IMHO this is good news. US politicians are in a bind here between the demands of environmentalists who want it stopped at all costs - ie nothing will satisfy them - and economists who are thinking jobs, energy and sustainability. The job of a politician is to force compromises when parties hold unyielding positions, and this is what appears to be happening. It may well be that rerouting the pipeline in Nebraska will result in a safer path environmentally, and despite the protestations of the company that it can't be done, I'm sure that it can - and will.

OTOH, the demands of the environmentalists can never be satisfied, and at some point they will have to bend. In other words, we will eventually see a decision that neither side is happy with, but which both sides can live with.

BTW, I've always wondered why TRP isn't also planning an "Asian" pipeline to BC. I know that they've hinted at doing this if Keystone is rejected, but ISTM that these should be parallel projects rather than sequential ones if the principles of diversification and competition are to be followed.
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Re: TransCanada (Symbol-TRP)

Post by AltaRed »

Wallace wrote:BTW, I've always wondered why TRP isn't also planning an "Asian" pipeline to BC. I know that they've hinted at doing this if Keystone is rejected, but ISTM that these should be parallel projects rather than sequential ones if the principles of diversification and competition are to be followed.
There is. Enbridge's Gateway project.
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Re: TransCanada (Symbol-TRP)

Post by kenwood »

Wallace wrote:US politicians are in a bind here between the demands of environmentalists who want it stopped at all costs - ie nothing will satisfy them - and economists who are thinking jobs, energy and sustainability.

The following article suggests Obama is just trying to keep his job:

http://www.theglobeandmail.com/globe-in ... le2234242/

If the keystone pipeline project gets canned, does that mean oil will stay within Canada and thus we will enjoy stable gas price at the pump while the American gas pump price will go up?
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Re: TransCanada (Symbol-TRP)

Post by Sensei »

Hi,

As a shareholder in TRP of course the news was very disappointing.

I can, however, see both sides of the argument. On TRP's side, such a project needs to be thoroughly researched, and that research should include the not only the environmental impact, but also, the possible backlash that could be created by the forces that might be against such a project. The completely underestimated what environmentalist types are capable of. Company owners are no saints, but neither are the protest groups. The latter have become extremely sophisticated at manipulating the public opinion through media attention. I consider Obama to be a weak, easily swayed President, and Clinton to be opportunistic, and both are always looking for how to spin an issue. The best spin at the moment is to just go around any dialogue with the Canadian government let alone TRP. Thus we have the recent result.

On the other side of the coin, I have little faith that the oil sands will ever achieve the promise that they supposedly hold. The reason is mainly that the thinking is short term. Dirty fuel has to go in the near future and be replaced by cleaner, renewable sources. That is very clear. Also, oil sands oil extraction is expensive both in terms of dollars and in terms of the amount of energy (natural gas) consumed to produce just one barrel of oil. I don't have the exact figures, but I imagine that extraction costs per barrel range into the $70 - 80 neighborhood and that doesn't include the natural gas which, while seemingly free now (by product of oil production), could be a valuable resource in the future.
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Re: TransCanada (Symbol-TRP)

Post by StuBee »

Hello Sensei,

Your statement with regards to "extraction costs" made me curious so I did a google search with: "What are the costs for extracting oilsands?" It appears that extraction costs run in the 25$ to 35$ range per barrel. However, "break-even" costs are closer to 60$ to 70$ per barrel. Coincidentally, there is probably consensus on the "fact" that "oil-sands extraction" produces more (3 times more?) green-house gases than "conventional oil extraction". However, is this really material?? For instance, for the sake of argument, if oil-sands extraction produces,let us hypothesize, 3% of green-house gases (versus 1% for conventional) and the actual burning of the final product produces 97% of green-house gases (versus 99% for conventional) then the actual manner in which it is extracted is (almost) immaterial compared to the actual use of it! Mind you, I have no idea of what the real relative numbers are known to be... Also, my argument is biased by the fact that I have a financial interest in the future of the oil sands...
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Re: TransCanada (Symbol-TRP)

Post by Sensei »

Stubee,

FWIW, I think every investor in the Canadian stock market has a vested interest in the oil sands and I do too. Even non-energy related industries such as banks, retailers, manufacturers are in line for benefits. So almost everyone on FWR is on the same team. My point is that I restrain my expectations for development more so than others. Any way you slice it, extraction is difficult, expensive (relatively), and wasteful of other resources. I knew nothing of the greenhouse gas problem until you mentioned it above, but that is just one more. The forces ranged against anything to do with CO2 or other greenhouse gases are formidable. In many cases they seem misguided and unscientific, but fundamentally there is some right on their side.

In the intermediate term, we need oil and the oil sands may provide a significant amount in spite several negatives. In the long term, oil as an energy source needs to be largely replaced by other alternatives whether it is depleted or not.

I try to wend my way through this moral and financial quagmire. Leaving aside my objections to oil as a dirty fuel, I do invest in it, but I don't invest in Canadian extraction companies. From a strictly self-motivated point of view, I believe their optimism is misplaced. Also, none of them are big enough to pay a decent and/or reliable dividend. I prefer to go the international route with RDS and CVX both of which have interests in the oil sands, but both of which would not unduly suffer if things don't go as the optimists expect. Also, these two companies have the business acumen to collapse themselves in a controlled and profitable way.

TRP is an exception because it is in the business of energy transmission and storage as well as energy transmission infrastructure like the Keystone Pipeline. Not being completely tethered to the oil sands (or the Keystone Pipeline) is an attractive feature of the company, to me. That and they pay a decent and rising dividend. I would be interested in other similar companies and do hold three or four. Alas, I'd like to own Enbridge, but it doesn't yield a high enough dividend, but maybe one day I'll get lucky.
Cheers

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Re: TransCanada (Symbol-TRP)

Post by schmuck »

kenwood wrote: If the keystone pipeline project gets canned, does that mean oil will stay within Canada and thus we will enjoy stable gas price at the pump while the American gas pump price will go up?
We keep hearing that any pipeline to eastern Canada would be far too costly, despite ever increasing rail transport to US refineries. However, ISTM that the real problem is the lack of refining capacity anywhere in Canada. Of all our old and inefficient refineries, the largest are Irving and Dartmouth, the longest possible distance from northen Alberta.

Anyway, ISTM that the cost of new refineries to replace the imported oil to feed Ontario and Quebec would be close to the cost of the Keystone project with little more than half the capacity of the proposed Keystone line.

As for Obama, by deferring the decision to when he wont be in office, he has clearly shown us that he has no balls.
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Re: TransCanada (Symbol-TRP)

Post by Wallace »

AltaRed wrote:
Wallace wrote:BTW, I've always wondered why TRP isn't also planning an "Asian" pipeline to BC. I know that they've hinted at doing this if Keystone is rejected, but ISTM that these should be parallel projects rather than sequential ones if the principles of diversification and competition are to be followed.
There is. Enbridge's Gateway project.
Is it just too expensive to plan more than one route at a time? It seems to be putting all one's eggs in a single basket.
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Re: TransCanada (Symbol-TRP)

Post by Wallace »

kenwood wrote:If the keystone pipeline project gets canned, does that mean oil will stay within Canada and thus we will enjoy stable gas price at the pump while the American gas pump price will go up?
I'm not so sure. This from today's G&M:
Canada’s oil exports, which are expected to grow by 1.5 million barrels a day in just 10 years, will start growing pinched enough that companies will, according to an analysis from IHS CERA, “face steeper and steeper price discounts for their crudes, as oil-sands production growth will outstrip new demand in existing markets.”

Some have warned that prices could fall by $10 to $20 a barrel. With Western Canada now producing 2.6 million barrels per day, even a $10 discount threatens some $9.5-billion a year.
Perhaps that is the hidden US agenda here. :(
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Re: TransCanada (Symbol-TRP)

Post by AltaRed »

Wallace wrote:Is it just too expensive to plan more than one route at a time? It seems to be putting all one's eggs in a single basket.
Too expensive for one company to spend hundreds of millions per project planning too many projects at one time. TRP already has 3 going.... Keystone, Mackenzie Gas and Alaska Gas. Perhaps more, but these are the key ones. Keystone held the earliest promise until the curve ball thrown at them. Companies like TRP and ENB have to keep plugging along a decade at a time until some political or economic crisis make a project a 'go'. Example: If the R's get into the White House in 1012, bomb Iran's nuclear facilities and be cut off from needed oil supplies, the R's will be prostituting themselves to get Keystone in the ground yesterday.
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Re: TransCanada (Symbol-TRP)

Post by AltaRed »

Wallace wrote:
kenwood wrote:If the keystone pipeline project gets canned, does that mean oil will stay within Canada and thus we will enjoy stable gas price at the pump while the American gas pump price will go up?
I'm not so sure. This from today's G&M:
Canada’s oil exports, which are expected to grow by 1.5 million barrels a day in just 10 years, will start growing pinched enough that companies will, according to an analysis from IHS CERA, “face steeper and steeper price discounts for their crudes, as oil-sands production growth will outstrip new demand in existing markets.”

Some have warned that prices could fall by $10 to $20 a barrel. With Western Canada now producing 2.6 million barrels per day, even a $10 discount threatens some $9.5-billion a year.
Perhaps that is the hidden US agenda here. :(
If there is insufficient crude oil capacity out of Canada, crude prices received by oil producers will drop some as noted. Perhaps even more than a $20 discount for some period of time. That affects all Canadians because of the economic rent that oil brings to ALL of Canada, despite short sighted rhetoric by many of Canada's premiers. There will never be enough of a crude discount in Canada to justify any significant additions to refining capacity in Canada. Gulf Coast refineries are simply too massive and the capital is mostly amortized. The economies of scale are not there for refineries under about 250,000 bpd (if not more) despite short term crude discounts. Refineries generally have poor investment returns with close to a 15+ yr payout. No sane person would invest billions in a Canadian refinery on the basis of a very whimsical crude oil discount that could disappear in 5 yrs when a Gateway or Keystone pipeline eventually gets built.

To Kenwood's point, there is probably only a 10* cent/litre arbitrage between wholesale Canadian and US gasoline prices, i.e. the amount it costs to move gasoline one direction or the other. There are no long term advantages when there is global free trade.

* I don't know what the number is, but it would be the cost of operating, maintaining and amortizing rail cars and tanker trucks to move gasoline one way or the other.
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Re: TransCanada (Symbol-TRP)

Post by Shakespeare »

IIRC, TRP doubled it's mainline several years back. Could they put half in oil?

Added: A long, long time ago Enbridge either reversed or converted a line.

Further added: conversion of a line from gas to oil is part of Keystone according to this article.
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Re: TransCanada (Symbol-TRP)

Post by AltaRed »

Only to the extent there is more surplus mainline gas transmission pipeline left that the NEB is prepared to let TRP convert, and that it goes to places oil wants to go. Unless there is another opportunity to reverse an existing Gulf Coast to Illinois oil pipeline to relieve supply overhangs in the Chicago area, putting more oil into the Great Lakes region makes no sense.
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Re: TransCanada (Symbol-TRP)

Post by Shakespeare »

putting more oil into the Great Lakes region makes no sense.
That gives tanker access, albeit only of Great Lakes size.
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Re: TransCanada (Symbol-TRP)

Post by Shakespeare »

TransCanada’s power assets drive its growth
Going back a decade, earnings before interest, taxes, depreciation and amortization from the pipelines division have been stuck in a lull around the $3-billion mark, with a high of $3.3-billion in 2008 and a low of $2.7-billion in 2001. Last year the unit provided EBITDA of $2.8-billion.

Its energy unit, which is dominated by power generation, is a drastically different story. Since posting EBITDA of $383-million in 2001, there has been growth in every single year except one, reaching an EBITDA of $1.1-billion last year. That’s growth of 187 per cent in 10 years.
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Re: TransCanada (Symbol-TRP)

Post by StuBee »

So is Keystone XL a done deal... Will Obama have the courage to "kill the deal" because of "insufficient time to address environmental issues":

http://business.financialpost.com/2011/ ... c-victory/
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Re: TransCanada (Symbol-TRP)

Post by AltaRed »

It is not a done deal yet, but regardless, this is not a good way for a project to be approved. Better that it be approved 'on its own merits'. However, this too shall pass.
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Re: TransCanada (Symbol-TRP)

Post by Descartes »

Obama administration rejects Keystone oil pipeline
"This announcement is not a judgment on the merits of the pipeline, but the arbitrary nature of a deadline that prevented the State Department from gathering the information necessary to approve the project and protect the American people," Obama said in a statement.
Although I'm a stockholder, I'm a little amused by the game playing here. If you think this will get approved after the election then this might be a buying opportunity if more retailers sell-off tomorrow.... I'm considering it.
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Re: TransCanada (Symbol-TRP)

Post by AltaRed »

It will probably get approved in early 2013. This is a political football between the Dems and Rebs. Both know they need the oil to flow. It may well be a buying opportunity but all this investor reaction is premature. It will be another 3 yrs before any cash flows from this.
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Re: TransCanada (Symbol-TRP)

Post by JaydoubleU »

Yes, I agree, it has become a silly game. My own concern is what capital requirements TRP will have when Keystone DOES get approved.
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Re: TransCanada (Symbol-TRP)

Post by Shakespeare »

Got 50 on the dip this morning, although at $41.23 I missed the bottom by almost a dollar.
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Re: TransCanada (Symbol-TRP)

Post by tedster »

I for one cannot understand the intransigence of the Management of TRP when the resistance to their preferred route started. Why they didn't just agree and re-route is wierd. For this kind of "leadership" someone will walk away with an enormous bonus.

edited to correct TRP.
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Re: TransCanada (Symbol-TRP)

Post by Shakespeare »

Management of such firms usually come up through the professional (engineering or scientific) side. They are insensitive to political realities. The route was based on an engineering decision rather than a political one. Similarly with Enbridge, who might have been better off politically choosing Prince Rupert.
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Re: TransCanada (Symbol-TRP)

Post by Sensei »

Hi,

Also as a shareholder in TRP, I don't see any heroes in this sad story of the Keystone Pipeline. Obama's response, while somewhat reasonable, is still a tit-for-tat response to the Republican mandated deadline. And then, did the Republicans really intend to force a quick and intelligent decision or was it just to make Obama appear to be pandering to special interest groups and/or disregarding the wider economic consequences, read ignore the vast majority of American voters? What was their agenda? As is usual over the past year (think Europe as well), total political failure on both sides.

I think I said most of what I have to say about the environmental groups above. Perhaps they are right that the proposed route was not carefully considered (yes, I blame TRP as well), but for now, environmentalist or not, we still need oil. Environmental groups wield enormous clout relative to their numbers and their tactics rely just as much on spin as any Washington pol. Spin is not the same as fact.

That said, I still think TRP is a very solid company with or without the pipeline. My cost base is 32.50 per share, so still a nice margin of safety. I'd be a buyer at under $40 assuming I have cash on hand.
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