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(B)(N) TRP TransCanada Corporation

January 25, 2014
Courtesy: Syncrude Canada Limited

Courtesy: Syncrude Canada Limited

Drama. The world is awash in hydrocarbons and it’s a buyers market that turns almost everywhere on transportation and refinery costs.

Canada is a producer and has been since Leduc in 1947 and is now 6th in the world, but its reserves are largely in heavy oil and tar sands (Syncrude Canada Limited) and its primary export market – after more than 65 years of development – is in the US (The Wall Street Journal, January 21, 2014, Canada an Emerging Market? Yes, for U.S. Oil Exports and The National Post, December 2, 2013, Canada at ‘crossroads’ in bid to become oil export superpower).

Obviously (ibid, The Wall Street Journal), the path to “oil export superpower” (ibid, The National Post) is not through the US and if the Keystone XL is built, it is only a stepping-stone and would increase the current shipments to and through the US by only about 25% (Reuters, January 16, 2014, Canada loses patience on Keystone XL, tells U.S. to decide).

The Tar Sands Pipeline Boom

The Tar Sands Pipeline Boom
Usque Ad Mare
Courtesy: Inside Climate News

Notwithstanding similar US “pipe dreams” TAPS in Alaska (also estimated at $40 billion), there are additional plans afoot to develop the Canadian pipeline infrastructure from the west coast to the east coast and north and south. Please see the chart on the left.

However, these projects are political and regulatory “footballs” and investors have tended to keep their hands in their pockets until the lights change from red to yellow to green – and stay green with a bonded debt.

Despite the uncertainty, TransCanada has continued to function and has been in the Perpetual Bond™ since much lower prices of $25 to $30 three years ago and well below the current $48 to $50 and recovering from $45 last year.

The dividend yield is currently 4.2% and the company paid $1.3 billion to its shareholders last year for a return of earnings of 81% which is typical of utilities. Our estimate of the downside in the stock price due to the demonstrated volatility is minus ($2) per share so that we could expect the stock to trade between the current $48 and $46 to $50 without surprise.

Exhibit 1: (B)(N) TRP TransCanada Corporation – Risk Price Chart

(B)(N) TRP TransCanada Corporation - January 2014

(B)(N) TRP TransCanada Corporation – January 2014

TransCanada Corporation is an energy company, which operates in three business segments, Natural Gas Pipelines, Oil Pipelines and Energy. The Pipelines segment develops and operates energy infrastructure, including natural gas pipelines.

(Please Click on the Chart to make it larger if required.)

From the Company: TransCanada Corporation operates as an energy infrastructure company in North America. The company operates in three segments: Natural Gas Pipelines, Oil Pipelines, and Energy. The Natural Gas Pipelines segment owns and operates energy infrastructure, including natural gas pipelines and regulated natural gas storage facilities. The Oil Pipelines segment owns and operates Keystone crude oil pipeline system comprising 3,467 kilometers transporting crude oil from Hardisty, Alberta to Wood River and Patoka in Illinois; and to Cushing in Oklahoma. The Energy segment engages in the acquisition, development, construction, ownership, and operation of electrical power generation plants; purchase and marketing of electricity; provision of electricity account services to energy and industrial customers; and development, construction, ownership, and operation of natural gas storage in Alberta, Canada. As of January 22, 2014, the company operated through a network of approximately 68,500 kilometers of natural gas pipelines; and 400 billion cubic feet of gas storage capacity, as well as owned or had interests in approximately 11,800 megawatts of power generation in Canada and the United States. TransCanada Corporation was founded in 1951, has 4,800 employees and is headquartered in Calgary, Canada.

For more information on the chart elements and additional references to the theory, please see our Post, The RiskWerk Company Glossary.

And for more on what risk averse investing has done for us this year, please see our recent Posts on The S&P TSX “Hangdog” Market or The Wall Street Put or specialty markets such as The Dow Transports & Utilities or (B)(N) The Woods Are Burning, or for the real class actionLa Dolce Vita – Let’s Do Prada! and It’s For You, Dear on the smartphone business.

And for more stocks at high prices, The World’s Most Talked About Stocks or Earnings Don’t Matter – NASDAQ 100. And for more on what’s Working in AmericaBig OilShopping in America or Banking in America, to name just a few.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond
Alpha-smart with 100% Capital Safety and 100% Liquidity
Guaranteed
With No Fees and No Loads on Capital

For more information on RiskWerk, please follow the Tags or Categories attached to this Letter or simply enter Search for additional references to any term that we have used. Related data may be obtained from us for free in a machine readable format by request to RiskWerk@gmail.com.

Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.

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