TransCanada Profit Declines as Producers Store More Gas

TransCanada Corp. (TRP), the Canadian company that proposed to build the $7.6 billion Keystone XL oil pipeline, said second-quarter profit declined 22 percent as it transported less natural gas and power asset earnings fell.

Net income dropped to C$286 million ($284 million), or 39 cents a share, from C$367 million, or 50 cents, a year earlier, Calgary-based TransCanada said in a statement today. Excluding losses from financial contracts and costs from a power plant shutdown, per-share profit was 5 cents less than the 48-cent average of 12 analysts’ estimates compiled by Bloomberg.

“Clearly the miss for us was in pipes,” Carl Kirst, a Houston-based analyst with BMO Capital Markets, said in a note to clients today. The “disappointing” results stem from low gas prices, which prompted companies to store rather than ship the fuel, wrote Kirst, who rates TransCanada the equivalent of a buy and doesn’t own the shares.

Gas prices in New York averaged $2.354 per million British thermal units during the second quarter, a 12-year low and a 46 percent drop from the same period last year. TransCanada said gas shipments on its systems fell 25 percent to an average of 4.4 billion cubic feet a day during the first six months.

Sales rose 0.5 percent to C$1.81 billion for the quarter. The company increased the average daily volume of oil shipments by 52 percent. TransCanada got the final U.S. permit it needed to build the southern portion of its Keystone XL oil pipeline, the company said in a separate statement today.

Starting Construction

It expects to begin construction in coming weeks of the $2.3 billion Gulf Coast project, after plans for the full 1,661- mile (2,762-kilometer) pipeline were rejected by the U.S. earlier this year. Keystone XL was proposed to carry as much as 830,000 barrels a day of crude from Canada’s oil sands to Gulf Coast refineries.

TransCanada rose 5 cents to C$44.85 at 11:12 a.m. in Toronto. The shares have seven buy, eight hold and two sell ratings from analysts.

Profit from the company’s power unit fell 47 percent from a year earlier. TransCanada owns 48.8 percent of the four nuclear reactors at Bruce Power A in Ontario and it will spend about C$2.4 billion to restore units 1 and 2, which have been shut since the 1990s.

Unit 2, which is in the process of starting after a 17-year shutdown, wasn’t synchronized to the grid in the second quarter as expected after an incident caused damage, the company said May 18. The company now expects the reactor online by the end of the year.

To contact the reporter on this story: Bradley Olson in Houston at bradleyolson@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net

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