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Linn Energy, LLC (LINE) Message Board

  • rlp2451 rlp2451 Mar 9, 2013 3:07 PM Flag

    Climb Aboard the Oil Train

    With North America producing more crude oil than its pipelines can carry, railroads are stepping in to transport the overflow to refineries that turn it into gasoline and other useful products. That should add to their profits for years—and create an opportunity for stock investors. Companies to favor include Canadian Pacific (ticker: CP), Union Pacific (UNP), and Norfolk Southern (NSC).

    Transporting a barrel of crude from the oil hub of Hardisty in Alberta, Canada, to the U.S. Gulf Coast, a major refining center, costs $7 to $11 using pipelines, but as much as $14 to $21 by rail, according to BMO Capital Markets. Every nickel per barrel matters for refiners, so under normal circumstances they'd balk at paying rail prices.

    But North America's production glut has left landlocked crude some $20 per barrel cheaper than the imported stuff shipped to coastal refineries. Refiners are happy to pay $10 extra for transport to get the discount. And what rails lack in pricing, they more than make up for in availability. Pipelines take years to build and can run up against environmental squabbling. Train tracks are already laid, and no one complains about adding more cars and extra offloading facilities.

    BNSF, is probably enjoying the biggest boost; it controls 82% of capacity for oil in the booming Bakken field in North Dakota. Rails should collect growing profits from oil as production rises—especially because cheap crude has set off a resurgence in energy-intensive businesses like manufacturing and chemical production, creating more growth in rail volumes. But not all rails will benefit equally. Credit Suisse transportation analyst Allison Landry expects Canadian Pacific, Kansas City Southern (KSU), and Union Pacific to get the biggest earnings boost.

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    • RKP'D has the perfect chance to take back yet another major mistake it made.

      This is a Barron piece and it included CSX as well. Given that Seaway can deliver more oil than infrastructure can handle at the other end picking up oil for East Coast refineries looks like a solid opportunity.

      But this is what the delusive-compulsive complex know as Progressive; in their merged political/religion, is all about. Libertine self absorption which makes them completely rude, childish and anti-social. Always resorting to misinformation as perception is reality in this twisted existence without any purpose.

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