You can learn a lot from corporate conference calls and research reports. Sometimes, you can catch a peek at emerging industry trends, giving a diligent analyst the investment edge. Let’s take a look at three quotes from last week and what they mean for investors.
Lots of pipeline capacity
Regular industry followers are well aware of the midstream infrastructure problems plaguing the continent. A lack of pipeline capacity combined with rapid production growth from the Alberta Oil Sands and the North Dakota Bakken has created a crude supply glut in the Midwest.
But last week, there were major developments on this issue north of the border. On Thursday, TransCanada announced that it will go ahead on its $12 billion Energy East project. Once completed, the pipeline will ship 1.1 million barrels per day of Alberta crude to refineries in Quebec and New Brunswick. But, TransCanada isn’t the only midstream company helping producers reach the market.
“By early 2016, Enbridge Inc (USA) (NYSE:ENB) and the partnership’s crude oil market access initiatives will provide a safe, reliable and efficient pipeline corridor, opening new markets for up to 1.7 million barrels per day.” — Mark Andrew Maki, Senior Vice President of Enbridge Energy Partners, L.P. (NYSE:EEP)
Enbridge Inc (USA) (NYSE:ENB) and its American subsidiary Enbridge Energy Partners, L.P. (NYSE:EEP) have been silently adding capacity. During the company’s quarterly report, management summarized their initiatives including de-bottlenecking terminals in the Chicago area, twinning the Spearhead and Seaway pipelines, and reversing the Line 9 route. Enbridge Inc (USA) (NYSE:ENB) estimates that these initiatives will add 1.7 million barrels per day of capacity by 2016. That’s the equivalent of more than two Keystone pipelines.
Bottom line — there should be enough pipeline capacity to ensure upstream producers get a fair price for their product.
Big oil is struggling
A round of earning reports show big oil is struggling to grow production. This statement from Royal Dutch Shell plc (ADR) (NYSE:RDS.A) summed up everything nicely.
“We don’t have oil and gas production targets. We have retired our outlook statements on production today. Our recent portfolio moves make the production target less and less relevant.” — Peter Voser CEO of Royal Dutch Shell plc (ADR) (NYSE:RDS.A)
Because of its enormous size, Shell is struggling to grow production. Last quarter, output declined 1.3% year-over-year and the goal of growing production is proving so difficult for the company that management will no longer disclose its output numbers to investors. But, Shell wasn’t alone. ExxonMobil, Chevron, and British Petroleum all reported output declines during the quarter.