You can learn a lot from corporate conference calls and research reports. Sometimes, you can catch a peek at emerging industry trends, giving a diligent analyst the investment edge. Let’s take a look at three quotes from last week and what they mean for investors.
Lots of pipeline capacity
But last week, there were major developments on this issue north of the border. On Thursday, TransCanada announced that it will go ahead on its $12 billion Energy East project. Once completed, the pipeline will ship 1.1 million barrels per day of Alberta crude to refineries in Quebec and New Brunswick. But, TransCanada isn’t the only midstream company helping producers reach the market.
“By early 2016, Enbridge Inc (USA) (NYSE:ENB) and the partnership’s crude oil market access initiatives will provide a safe, reliable and efficient pipeline corridor, opening new markets for up to 1.7 million barrels per day.” — Mark Andrew Maki, Senior Vice President of Enbridge Energy Partners, L.P. (NYSE:EEP)
Enbridge Inc (USA) (NYSE:ENB) and its American subsidiary Enbridge Energy Partners, L.P. (NYSE:EEP) have been silently adding capacity. During the company’s quarterly report, management summarized their initiatives including de-bottlenecking terminals in the Chicago area, twinning the Spearhead and Seaway pipelines, and reversing the Line 9 route. Enbridge Inc (USA) (NYSE:ENB) estimates that these initiatives will add 1.7 million barrels per day of capacity by 2016. That’s the equivalent of more than two Keystone pipelines.
Bottom line — there should be enough pipeline capacity to ensure upstream producers get a fair price for their product.
Big oil is struggling
A round of earning reports show big oil is struggling to grow production. This statement from Royal Dutch Shell plc (ADR) (NYSE:RDS.A) summed up everything nicely.
“We don’t have oil and gas production targets. We have retired our outlook statements on production today. Our recent portfolio moves make the production target less and less relevant.” — Peter Voser CEO of Royal Dutch Shell plc (ADR) (NYSE:RDS.A)
Because of its enormous size, Shell is struggling to grow production. Last quarter, output declined 1.3% year-over-year and the goal of growing production is proving so difficult for the company that management will no longer disclose its output numbers to investors. But, Shell wasn’t alone. ExxonMobil, Chevron, and British Petroleum all reported output declines during the quarter.
Big Oil is like a hamster running on a wheel. When a barrel of oil has been pumped out of the ground, it has to be replaced by another barrel of new reserves. That becomes an increasingly difficult task when most of the Earth’s conventional wells have been tapped out.
America, oil exporter?
Conversations are beginning on Capitol Hill between lawmakers and oil industry representatives about the potential of U.S. crude oil exports.
“LNG exports were the first wave from the American energy boom. And crude oil, I think, will be the next one.” — Blake Clayton, Council On Foreign Relations
The U.S. Export Administration Act of 1979 restricts the export of crude oil out of the country. But there’s a growing mismatch between the heavy crude U.S. refiners can process and the light, sweet type that’s coming out from the Bakken and Eagle Ford. This mismatch means the U.S. could soon face a supply glut of sweet crude. To get around this issue, some economists suggest trading U.S. light crude with heavier oil from other nations.
In 2012, the U.S. was a net petroleum product exporter, sending 2.6 million bpd of refined output overseas. Could the country become an exported of crude oil as well?
Foolish bottom line
The oil patch is alive and growing, but it won’t be a gentle ride for all the players involved. But by carefully listening to conference calls and industry reports, investors can sometimes avoid traps and exploit hidden opportunities.
The article 3 Can’t Miss Quotes for Energy Investors This Week originally appeared on Fool.com and is written by Robert Baillieul.
Robert Baillieul has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Robert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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