Keystone pipeline may be 'unsaleable' after spill; analyst pushes other asset sales

Emergency crews work to clean up the largest U.S. crude oil spill in nearly a decade, following the leak at the Keystone pipeline operated by TC Energy in rural Washington County, Kansas, U.S., December 9, 2022. REUTERS/Drone Base (Dronebase Dronebase / reuters)

TC Energy’s (TRP.TO)(TRP) Keystone crude oil pipeline may be “unsaleable” in 2023 after its 14,000-barrel spill last year. That’s according to a RBC Capital Markets analyst calling for management to double or triple the size of the company's plan to sell off billions in assets this year.

On Monday, the Calgary-based energy and infrastructure firm said it’s too early to estimate the cost of the Dec. 7 pipeline rupture, as clean-up efforts continue in Kansas. While the 622,000 barrel-per-day artery resumed service in late December, RBC’s Robert Kwan says the incident could put Keystone “out of the picture” as TC Energy looks to sell $5 billion in assets.

“We wonder if the Keystone spill will effectively render that asset as unsaleable in 2023,” he wrote in a note to clients on Wednesday. “Instead, we turn our attention to selling a 49 per cent stake in NGTL (the Nova Gas Transmission Line).”

Speaking at TC Energy’s investor day in December, chief executive officer Francois Poirier said “there are no sacred cows” when it comes to shedding assets to bankroll growth and pay down debt in 2023.

While the company is best-known for its Keystone oil pipeline system, a Canada-U.S. artery that grabbed headlines for an expansion project that ultimately failed, natural gas distribution is a larger part of TC Energy’s business.

Kwan says selling a 49 per cent non-controlling stake in NGTL could be worth $12 billion. According to TC Energy, the 24,494 km line connects most of the natural gas production in western Canada to domestic and export markets.

“We think the time has come to go big and leave no doubt, and based on our discussions with investors, we believe this may be a path to share price outperformance in 2023,” he wrote. “We believe an asset monetization program in the $10 to $15 billion range could provide numerous benefits to the company.”

Toronto-listed TC Energy shares added 1.51 per cent on Thursday to 56.64 at 12:29 p.m. ET. The stock has fallen about 10 per cent in the past 12 months, bucking the trend as Canadian energy stocks benefited from higher commodity prices in 2022.

Kwan maintains an “outperform” rating on TC Energy’s stock, with a $73 per share price target.

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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