Every pipeline has two stories. The first one is about who builds and maintains the line; the second is about who fills it with product. Today we have two stories covering the birth of one project and the product that fills several others.
The oil must flow
Alberta oil company Husky Energy (TSX: HSE) has announced that it has made commitments to ship its bounty through four new proposed oil pipelines. In the west, Husky’s product will flow through the Enbridge (TSX: ENB)(NYSE: ENB) Northern Gateway line and the Kinder Morgan (NYSE: KMP) Trans Mountain Expansion line. In the east, oil and gas from the coast of Newfoundland will flow through the TransCanada (TSX: TRP)(NYSE: TRP) Energy East pipeline. Fourth but not least is Enbridge’s Flanagan South Project carrying product from Illinois to Oklahoma. Even without these pipelines, Husky has enough transportation capacity to get to 2020, just in case one or more of these projects don’t materialize.
Husky has been growing at a rapid pace in the past four years. Back in 2010, Husky only had five long-term projects on the books. In 2014, Husky showcased over 50 near- and long-term projects being explored by the company. These projects are helping daily production grow from 301,000 boe/day in 2012 to an expected rate of 440,000 by 2017.
For investors, the pipeline agreements will keep the product flowing to refineries, maintaining revenue. Investors should also be quite pleased with the growth of active and upcoming projects, especially in Alberta and Newfoundland. The stock is trading in a 52-week range of $26.97 to $37.31, with a Thursday closing price of $36.03 and a price target of $38.50. Even though Husky is investing heavily in expansion it still offers an annual dividend of $1.20 with a yield of 3.3%.
The metal meets the dirt
While Husky announced that it would be using new pipelines, TransCanada announced that it would be building a new $1.9 billion pipeline. The 260 km pipeline is called the Merrick Mainline project and is the literal centrepiece of the Kitimat LNG project. It will carry natural gas from the northeast portion of the province to Summit Lake in the interior of British Columbia, where it will transfer over to the proposed Pacific Trail line ending in Kitimat.
The speed of this project is key for TransCanada, and for the co-owners of the Kitimat LNG project Chevron Corp (NYSE: CVX) and Apache Corp (NYSE: APA), as there are already 14 other LNG projects in the province attempting to be realized.
TransCanada is trading in a 52-week range of $43.94 to $51.89, with a Thursday closing price of $50.35 and an average price target of $54.30. It offers an annual dividend of $1.92 and a yield of 3.8%.
