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Must-know analysis: A closer look at TC PipeLine’s 1Q14 earnings

Avik Chowdhury

MLP pick: An investor's guide to TC PipeLines' earnings (Part 2 of 6)

(Continued from Part 1)

TC PipeLines earnigns

TC PipeLines (TCP) released its financial information for 1Q14 on April 28, 2014. The company recorded total revenues from transmission of gas through pipelines of $87 million for 1Q14, down 1.1% from $88 million of transmission revenues recorded in 4Q13. Earnings from equity (TCP’s equity ownership in the Northern Border and Great Lakes pipelines) rose 73.6% from $19.0 million in 4Q13 to $33.0 million in 1Q14. Net income improved 34.0% to $67.0 million in 1Q14 compared to last quarter’s figure of $50 million. Net income attributable to controlling interest increased from $41.0 million in 4Q13 to $57.0 million in 1Q14. Net income per common unit went up to $0.90 from $0.63 recorded in the last quarter of 2013. TCP’s stock price has gone down 1.6% from $52.09 since the day of its latest earnings on April 28, 2014, to $51.27 on May 2, 2014.

The improved result for 1Q14 was due to the positive effects of one of the coldest winters in recent times. The company’s GTN, Northern Border, and Great Lakes pipeline systems earned higher revenues through the winter. During winter, demand for natural gas goes up as a result of higher requirements from utilities companies. Natural gas is a major fuel used for home heating. The increase in net income attributable to controlling interests was primarily due to higher equity earnings from Northern Border and Great Lakes as a result of increased short-term services sold during the coldest periods of the winter.

TCP paid out $52 million in distributions for 1Q14, almost unchanged from $51 million in 4Q13. Partnership cash flows increased to $60 million in the first quarter of 2014, up 13.2% compared to $53 million last quarter. This increase was primarily due to the increased cash distributions from GTN and Bison as a result of TCP’s additional investment in these two pipelines in 2013. Partnership cash flows include net income attributable to controlling interests in North Baja and Tuscarora and cash distributions received from Great Lakes, Northern Border, GTN, and Bison less net income attributed to GTN and Bison not owned, net of distributions declared to the General Partner. Following TCP’s increased investment in GTN and Bison in July 2013, its share of cash distribution from these two subsidiaries have gone up.

TC PipeLines LP (TCP) is a master limited partnership operating in the midstream energy space. TC PipeLine’s general partner is wholly owned by TransCanada Corporation (TRP). TC PipeLines is also part of the Global X MLP & Infrastructure ETF (MLPX), Alerian MLP ETF (AMLP), and MLP ETF (MLPA).

Continue to Part 3

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