TransCanada Quarterly Profit Falls on Lower Gas Transport

TransCanada Corp., the company that proposed the Keystone XL oil pipeline, said third-quarter profit fell 4.4 percent as it transported less natural gas and had maintenance at some power plants.

Net income dropped to C$369 million ($369 million), or 52 cents a share, from C$386 million, or 55 cents, a year earlier, the Calgary-based company said today in a statement. Excluding one-time items, per-share profit was 2 cents less than the 52-cent average of 14 analysts’ estimates compiled by Bloomberg.

“In the third quarter, our base businesses continue to perform well, despite challenges of weak demand and soft gas and power prices in our commodity exposed business,” Russ Girling, TransCanada’s chief executive officer, said on a call with analysts today. Outages at the company’s Bruce Power and Sundance A power plants hurt results, Girling said.

A gas glut in North America that cut profits for producers and sent prices to a 10-year low also affected TransCanada as more of the fuel remained in storage. Natural gas prices averaged $2.893 per million British thermal units in New York during the quarter, down 29 percent from a year earlier. The futures have recovered after reaching a 10-year low on the New York Mercantile Exchange in April.

TransCanada will continue to be affected by low natural gas and power prices and high gas storage levels “until we see a recovery in the macro natural gas environment and a normalization of weather patterns,” Donald Marchand, chief financial officer, said on the call.

Building Keystone

Unit 4 of the Bruce Power nuclear plant was shut for maintenance in August, work that’s expected to conclude by the end of the year. Power production resumed at Unit 1 and 2 of the plant this month. The Sundance A plant will remain out of service until the fall of 2013, TransCanada said.

Sales rose 4.1 percent to C$2.13 billion, missing the average of five analysts’ estimates compiled by Bloomberg.

TransCanada fell less than 1 percent to C$44.74 at the close in Toronto.

In August, TransCanada started building the southern portion of its 1,661-mile (2,762-kilometer) Keystone XL line, renamed the $2.3 billion Gulf Coast pipeline project, after the U.S. rejected the full line earlier this year. The company re-applied to build a revised portion of the Keystone XL through Nebraska, according to its website.

Mainline Conversion

TransCanada said yesterday it will join with a unit of PetroChina Co. Ltd. to build a C$3 billion pipeline project to ship oil from oil-sands projects in northern Alberta to Edmonton.

The company’s results were “slightly below expectations,” and shares could come under pressure, said Pierre Lacroix, an analyst at Desjardins Securities Inc. in Calgary, in a note.

“All eyes remain focused on key upcoming events, such as the outlook for Keystone XL and the Canadian mainline,” he said.

The company is “actively pursuing” a potential conversion of part of its mainline gas pipeline to carry oil from Alberta to eastern Canada, Girling said on the call.

The project may cost C$5 billion or more for the conversion of gas-compression facilities to pumping plants and work to confirm pipeline integrity and would initially ship light oil to Canadian and U.S. refineries in the east, Alex Pourbaix, TransCanada’s president of energy and oil pipelines, said. The company will decide in early 2013 on the project, which would carry between 500,000 and 1 million barrels a day, he said.

The line may export crude to Europe and Asia, Girling said, declining to comment on “confidential” discussions around a potential coastal link for the line that ends in Montreal.

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