Keystone pipeline may be ‘unsaleable’ after spill, analyst pushes other asset sales
TC Energy’s (TRP.TO)(TRP) Keystone crude oil pipeline may be “unsaleable” in 2023 after its 14,000-barrel spill last year. That’s according to a RBC Capital Markets analyst calling for management to double or triple the size of the company’s plan to sell off billions in assets this year.
On Monday, the Calgary-based energy and infrastructure firm said it’s too early to estimate the cost of the Dec. 7 pipeline ruptureAs Kansas continues to clean up, While the 622,000 barrel-per-day artery resumed service in late December, RBC’s Robert Kwan says the incident could put Keystone “out of the picture” as TC Energy looks to sell $5 billion in assets.
“We wonder if the Keystone spill will effectively render that asset as unsaleable in 2023,” he wrote in a note to clients on Wednesday. “Instead, we turn our attention to selling a 49 per cent stake in NGTL (the Nova Gas Transmission Line).”
Speaking at TC Energy’s investor day in December, chief executive officer Francois Poirier said “there are no sacred cows” When it comes to the shedding of assets in order to bankroll growth or to pay down debts in 2023.
While the company is best-known for its Keystone oil pipeline system, a Canada-U.S. artery that grabbed headlines for an expansion project that ultimately failed, natural gas distribution is a larger part of TC Energy’s business.
Kwan estimates that a sale of a 49 percent non-controlling share in NGTL could bring in $12 billion. According to TC Energy the 24,494 km route connects the majority of natural gas production in Western Canada to the domestic and export markets.
“We think the time has come to go big and leave no doubt, and based on our discussions with investors, we believe this may be a path to share price outperformance in 2023,” he wrote. “We believe an asset monetization program in the $10 to $15 billion range could provide numerous benefits to the company.”
Toronto-listed TC Energy shares increased 1.51 percent on Thursday to 56.64 by 12:29 p.m. ET. The stock has fallen by about 10% over the past 12 month, which is unusual considering that Canadian energy stocks were able to benefit from higher commodity prices for 2022.
Kwan maintains an “outperform” rating on TC Energy’s stock, with a $73 per share price target.
Jeff Lagerquist works as a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.