Kinder Morgan Canada faces pressure on Trans Mountain in its first earnings

Kinder Morgan Canada president Ian Anderson. Image: Business in Vancouver

CALGARY _ Kinder Morgan Canada is facing mounting pressure to detail its plans for the Trans Mountain oil pipeline expansion when it releases its first earnings report Wednesday since going public.

Analysts and investors are hoping for clarity on the fate of the project, which has been thrust into question since John Horgan's NDP in British Columbia wrestled power from the Liberals with the help of the Greens, who are staunchly opposed to the $7.4-billion development.

The company, which has said it stands by the merits of the project, is scheduled to report its second-quarter results after markets close Wednesday, followed by a conference call with analysts.

"We expect KML-specific topics to be covered to include whether the Trans Mountain expansion project is on track for construction to begin in September 2017, as well as commentary on the NDP-led government in B.C.," said RBC analyst Robert Kwan in a report to clients.

Kinder Morgan Canada president Ian Anderson has said he is willing to meet with the provincial NDP and Greens but won't make further concessions on the project, setting the stage for a potential showdown between the energy giant and the fledgling government.

The company did not immediately respond to a request for comment on Tuesday.

In May, Kinder Morgan Canada completed its $1.75-billion initial public offering to raise funds for the Trans Mountain expansion in one of the biggest and most controversial IPOs in Canada in recent memory. Since then, its stock has lost ground from the initial offering of $17 per share, trading for $16.18 on the Toronto Stock Exchange on Tuesday.

TD Securities analyst Linda Ezergailis wrote in a report that clarification on timing of the Trans Mountain project will likely boost the company's shares.

"We believe that KML shares will re-rate upwards once investor confidence in the timing of bringing TMEP into service is bolstered by a clear line of sight to the conclusion of provincial political uncertainty and litigation associated with social license issues," she said.

Prime Minister Justin Trudeau approved the project to twin the Trans Mountain pipeline between Edmonton and Burnaby, B.C., last fall and then-B.C. premier Christy Clark came to support it in January after five conditions she placed on it had been met.

However, after Clark lost the election, Horgan has promised to use "every tool" available to stop the expansion.

After being sworn in on Tuesday, Horgan said the Ministry of Justice was planning to brief him on the status of several legal cases underway in the province.

"We're going to talk to the various ministries responsible for permitting and we'll have more to say about that in the future."

The results from Kinder Morgan Canada kick off second-quarter earnings in the oilpatch, with news about shipper commitments for TransCanada's Keystone XL pipeline also expected to garner attention when the pipeline company reports its results on July 28.

Higher Canadian interest rates and uncertainty about where oil prices are headed have made for a cautious mood as major Calgary-based producers roll out their latest earnings, with Husky Energy and Encana reporting on Friday.

Judith Dwarkin, chief economist at RS Energy Group, said higher interest rates generally mean a stronger loonie, spelling bad news for oil companies who pay most of their costs in Canadian dollars and sell most of their products in U.S. currency.

"It's a little more headwind for producers already facing fairly strong headwinds," she said.

"At the same time, oil prices are starting to move up so that to some extent may help to offset the impact of the higher dollar."

CIBC analyst Arthur Grayfer said in a note Monday that results from oil and gas companies that also own refineries will be aided by better refining profit margins in the second quarter.

He said many major oil and gas producers in Western Canada had planned and unplanned maintenance shutdowns in the second quarter which could result in lower production and higher costs.

© 2017 The Canadian Press