TransCanada Corporation (TRP - Free Report) recently announced that it has received the Federal Energy Regulatory Commission’s (FERC) approval for full in-service of its Mountaineer XPress (“MXP”) natural gas pipeline project. The approval also enabled the company to commence partial in-service of its Gulf XPress (“GXP”) project. These projects, supported by long-term contracts from clients, are expected to deliver natural gas supplies from the Appalachian Basin to meet the growing market demand in the United States and farther.
The MXP project boasts a 170-mile natural gas pipeline, with 36-inch diameter, in West Virginia. The project has the potential to increase the pipeline’s transportation capacity by 2.7 billion cubic feet per day (Bcfd). It incorporates three new compressor stations along with modification of three existing compressor stations. The company invested $3.2 billion in the project, including significant cost overruns that stemmed from delays in regulatory approvals, high demand for construction resources and others. The project was earlier expected to be completed by 2018-end, with an investment of $2.6 billion.
The partial in-service of TransCanada’s $600-million GXP Project, a network of four new compressor stations in Kentucky, Tennessee, and Mississippi, is likely to significantly expand the reach of low-cost natural gas from the Appalachian Basin. The project is expected to enhance transportation capacity by 530,000 million cubic feet per day on the Columbia Gulf Transmission System. The pipeline is expected to become fully operational in the coming weeks.
In addition to boosting takeaway capacity, the projects enhanced TransCanada’s footprint in the prolific Appalachian Basin. These pipelines will ship natural gas from the Marcellus and Utica shales. Notably, production in the Appalachian Basin is expected to lead the surge in natural gas output from the United States for the next few years, per U.S. Energy Information Administration. From an estimated 83.3 Bcfd in 2018, gas production in the country is expected to increase to 90.2 Bcfd in 2019 and 92.2 Bcfd in 2020. The rise in output further testifies to the need for natural gas pipeline projects. The MXP and GXP projects are expected to generate high long-term returns as well as stable cash flow for investors.
Zacks Rank and Stocks to Consider
Currently, TransCanada carries a Zacks Rank #3 (Hold). Investors interested in the energy sector can opt for some better-ranked stocks as given below:
Enbridge Inc. (ENB - Free Report) is a Calgary, Canada-based energy infrastructure provider. The company delivered average positive earnings surprise of 31.8% in the trailing four quarters. It currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Madrid, Spain-based Repsol, S.A. (REPYY - Free Report) is an integrated energy company. Its bottom line for 2019 is expected to increase 13.7% year over year. The company delivered average positive earnings surprise of 9% in the trailing four quarters. The stock currently has a Zacks Rank #2.
Austin, TX-based Jones Energy, Inc. (JONE - Free Report) is an exploration and production company. For 2019, its bottom line, which has witnessed one upside revision over the past 60 days, is expected to grow 19% year over year. The company currently holds a Zacks Rank #2.
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