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Cenovus Energy (CVE) Agrees to Transport Heavy Oil by Rail

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Cenovus Energy Inc. (CVE - Free Report) has signed accords for carrying heavy crude to the U.S. Gulf Coast from Northern Alberta.  

Through the railway networks of two leading rail companies in Canada, the heavy crude will likely be transported at a rate of 100,000 barrels every day (bpd) for a period of three years.  

With support from Canadian National Railway Company (CNI - Free Report) , the company is expected to commence transporting oil from the fourth quarter of 2018 from its Bruderheim terminal. Moreover, from the Hardisty terminal of USD Partners LP (USDP - Free Report) , Cenovus Energy will start carrying oil since the second quarter of 2019 with Canadian Pacific Railway Limited (CP - Free Report) .

There has been a dearth of pipeline transportation capacity to support the escalating oil production from the oil sands of Alberta. This pipeline bottleneck problem is leading the Canadian heavy oil to trade at a record discount to the West Texas Intermediate (WTI) crude. Hence, on the back of the railway transportation deals, the company will be able to carry oil to the markets where the commodity prices are higher.

Meanwhile, major pipeline projects are underway to solve the bottleneck problems. However, the developments are unlikely to commence operations before the second half of 2019.

Headquartered in Calgary, Canada, Cenovus Energy is among the leading integrated energy firms. However, the stock’s pricing chart doesn’t look impressive. In the past year, the stock has declined 8.8%, against the 7.5% collective gain of the stocks belonging to the industry.

Presently, Cenovus Energy carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

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