Energy Ink

TransCanada ups dividend and pushes back Keystone

February 15, 2012

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Still waiting: Bear with us, TransCanada Corp. seems to be telling investors. Yesterday, the pipeline and power giant upped its dividend five per cent to $0.44 per share per quarter after posting comparable earnings of $366 million or $0.52 per share through the fourth-quarter of 2011, down slightly from $384 million or $0.55 per share from the same period in 2010.

The concession was overshadowed by the bigger, though hardly surprising, news that the firm’s beleaguered Keystone XL pipeline to the Texas Gulf Coast won’t be up and running any time before early 2015.

In a release, the company said it would reapply for a presidential permit. It expects that application would be handled in an “expedited manner,” a dim prospect that analysts were quick to put down. “We remain concerned about the political risk surrounding the Keystone XL pipeline,” FirstEnergy Capital’s Steven Paget told clients this morning.

“We believe that the attempt by congressional Republicans to use the pipeline as a political wedge issue has set the pipeline back by a year to a start date of 2016,” Paget wrote.

What’s clear is that with $2.4 billion already sunk in the pipeline project, which is now estimated to cost $7.6 billion, TransCanada seems far from abandoning plans to link Alberta’s oil sands to the Gulf Coast refining corridor.

Elsewhere, the firm is moving to secure additional commitments to support expansions to natural gas transmission systems in northwest Alberta and northeast British Columbia. Officials said yesterday that the firm had booked shipping commitments that would siphon 3.4 billion cubic feet of gas per day from the sprawling Montney region by 2014.

The total is more than double the planned 1.4 billion cubic feet per day Apache Canada would process at its Kitimat LNG hub. The difference there, of course, is that one pipe system leads to a saturated market; the other points West to China.

Alberta shale: Anybody who thought the new drilling landscape was cheap ought to take a hard look at Yoho Resources Inc. The company yesterday reported results of its fourth test well in Alberta’s Duvernay shale.

The well was drilled, completed and tested for the tidy sum of $13.5 million. Yoho has a 50 per cent working interest on the well with Celtic Exploration.

Early results impressed observers. The well tested at a rate of 6 million cubic feet per day over an 11-day flow period, Adam Twa and Andrew Waters at Peters & Co. note, with a condensate rate of 658 barrels per day (109 barrels per million cubic feet).

That compares with expectations that first-month initial production in the Duvernay would hit 3.5 million cubic feet per day, with a liquids yield of 75 barrels barrels per million cubic feet at a cost of $12 million.

The analysts have put a 12-month target price of $3.75 per share on Yoho, which they note “has done a good job of capturing meaningful land positions in both the liquids-rich window of the emerging Duvernay shale play at Kaybob” and prospective slices of the Montney formation. Twa and Waters value the firm’s 17.7 net sections of Duvernay rights, for instance, at $3 million per section, or $1.09 per share.

They caution, though, that Alberta’s shale play is in its infancy, and future project financing is (as always) a question mark.

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