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Kinder Morgan's Trans Mountain Issues Final Cost Estimates
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Kinder Morgan Inc.’s (KMI - Free Report) recently announced that its Trans Mountain pipeline has progressed significantly in terms of regulatory, commercial and construction planning, since it received approval from the Government of Canada.
The expansion project was in response to the requests from oil shippers to help them gain access to new markets by increasing the capacity of North America’s only pipeline with reach to the West Coast.
In 2012, about 80% of the capacity of the expanded pipeline or 708,000 barrels per day was committed by 13 shippers, who made 15- and 20-year commitments. The remaining 20% was earmarked for spot volumes in keeping with the National Energy Board (“NEB”) directive.
Subsequent to the Federal approval and in line with agreements with firm shippers, Trans Mountain provided a final cost estimate and amended tolls for its shippers. Shippers had the option to keep their volume commitments or refuse them and pay their share of development costs incurred to date.
Kinder Morgan’s final cost estimate and increased tolls indicate that the updated project cost in now $7.4 billion CAD. A number of factors might have been responsible for the increase in project cost. These are likely to include costs related to the NEB’s 157 Conditions and project changes as a result of public feedback, such as thicker pipe wall, additional drilled crossings in environmentally sensitive areas and the Burnaby Mountain tunnel.
Since the release of the final cost estimates and revised tolls, some existing and prospective shippers have picked up capacity from other shippers. The net result of that process is the net drop of only 22,000 barrels per day or 3% of the earlier committed barrels.
Those barrels will be made available, on the same terms as the existing commitments, to the market in an open season beginning on Mar 9. An open season is a commonly used commercial process that enables customers to secure space on the pipeline. In this open season, the only space available will be the 22,000 barrels per day of capacity turned back, as the remaining 97% of the firm volumes are under contract with existing or new shippers.
Subsequent steps for the project comprise arranging acceptable financing and a final investment decision by Kinder Morgan. Construction is scheduled to commence in fall 2017 and the project is likely to have an in-service date in late 2019.
Kinder Morgan’s price chart reveals that its shares have underperformed the Zacks categorized Oil & Gas-Production/Pipeline industry in the last one month. Kinder Morgan shares have lost 5.6%, whereas the broader market decreased 4.1%.
Investors interested in the same space can consider Pioneer Natural Resources Company (PXD - Free Report) , Crescent Point Energy Corp. (CPG - Free Report) and Cenovus Energy Inc. (CVE - Free Report) .
Pioneer Natural Resources posted a positive earnings surprise of 63.33% in the preceding quarter. It had an average positive earnings surprise of 21.86% in the four trailing quarters.
Crescent Point Energy posted a positive earnings surprise of 244.44% in the preceding quarter. It beat estimates in all the four trailing quarters with an average positive earnings surprise of 127.16%.
Cenovus Energy posted a positive earnings surprise of 583.33% in the preceding quarter. It beat estimates in two of the four trailing quarters with an average positive earnings surprise of 74.89%.
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Kinder Morgan's Trans Mountain Issues Final Cost Estimates
Kinder Morgan Inc.’s (KMI - Free Report) recently announced that its Trans Mountain pipeline has progressed significantly in terms of regulatory, commercial and construction planning, since it received approval from the Government of Canada.
The expansion project was in response to the requests from oil shippers to help them gain access to new markets by increasing the capacity of North America’s only pipeline with reach to the West Coast.
In 2012, about 80% of the capacity of the expanded pipeline or 708,000 barrels per day was committed by 13 shippers, who made 15- and 20-year commitments. The remaining 20% was earmarked for spot volumes in keeping with the National Energy Board (“NEB”) directive.
Subsequent to the Federal approval and in line with agreements with firm shippers, Trans Mountain provided a final cost estimate and amended tolls for its shippers. Shippers had the option to keep their volume commitments or refuse them and pay their share of development costs incurred to date.
Kinder Morgan’s final cost estimate and increased tolls indicate that the updated project cost in now $7.4 billion CAD. A number of factors might have been responsible for the increase in project cost. These are likely to include costs related to the NEB’s 157 Conditions and project changes as a result of public feedback, such as thicker pipe wall, additional drilled crossings in environmentally sensitive areas and the Burnaby Mountain tunnel.
Since the release of the final cost estimates and revised tolls, some existing and prospective shippers have picked up capacity from other shippers. The net result of that process is the net drop of only 22,000 barrels per day or 3% of the earlier committed barrels.
Those barrels will be made available, on the same terms as the existing commitments, to the market in an open season beginning on Mar 9. An open season is a commonly used commercial process that enables customers to secure space on the pipeline. In this open season, the only space available will be the 22,000 barrels per day of capacity turned back, as the remaining 97% of the firm volumes are under contract with existing or new shippers.
Subsequent steps for the project comprise arranging acceptable financing and a final investment decision by Kinder Morgan. Construction is scheduled to commence in fall 2017 and the project is likely to have an in-service date in late 2019.
Kinder Morgan’s price chart reveals that its shares have underperformed the Zacks categorized Oil & Gas-Production/Pipeline industry in the last one month. Kinder Morgan shares have lost 5.6%, whereas the broader market decreased 4.1%.
Investors interested in the same space can consider Pioneer Natural Resources Company (PXD - Free Report) , Crescent Point Energy Corp. (CPG - Free Report) and Cenovus Energy Inc. (CVE - Free Report) .
Pioneer Natural Resources posted a positive earnings surprise of 63.33% in the preceding quarter. It had an average positive earnings surprise of 21.86% in the four trailing quarters.
Crescent Point Energy posted a positive earnings surprise of 244.44% in the preceding quarter. It beat estimates in all the four trailing quarters with an average positive earnings surprise of 127.16%.
Cenovus Energy posted a positive earnings surprise of 583.33% in the preceding quarter. It beat estimates in two of the four trailing quarters with an average positive earnings surprise of 74.89%.
5 Trades Could Profit "Big-League" from Trump Policies
If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.
Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure. See these buy recommendations now >>