Kirby Corp., a Houston-based operator of a fleet of U.S. tank barges, rose to a 31-year high as booming shale energy production increases shipping demand.
Kirby gained 2.6 percent to $74.30 at 3:13 p.m. on the New York Stock Exchange. The price reached $74.62, the highest level since May 1981, according to data compiled by Bloomberg. The shares are up 20 percent in 2013 and 37 percent in the past three months.
Increased use of horizontal drilling and hydraulic fracturing has boosted production of natural gas liquids such as ethane, a key raw material for petrochemical production. Oil output has overwhelmed pipelines, forcing refineries to look to railroads and barges to move crude.
“Rising natural gas production is helping them, rising crude oil production is helping them, and the refining capacity shift in the U.S. is helping them out as well,” said Doug Mavrinac, an analyst for Jefferies & Co. Inc. in Houston. Jefferies rates Kirby a buy and has a target price of $87.
Lower natural gas and natural gas liquids prices have led U.S. petrochemical manufacturers like Dow Chemical Co. and DuPont Co. to boost production. That has pushed the utilization rate of Kirby’s petrochemical fleet above 90 percent, Mavrinac said.
“Kirby moves the feedstocks in and they move the products out,” he said. “Their biggest customers are Dow and DuPont.”
Growing oil production in South Texas and increased pipeline capacity could create a surplus of light, sweet crude in Houston and Corpus Christi. That oil may find its way onto Kirby’s coastal barges to head to other refineries.
The Jones Act, which requires ships carrying cargo between U.S. ports to be U.S.-built, flagged and crewed, makes it difficult to bring new shipping capacity into the market, strengthening Kirby’s position, Mavrinac said.