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TC PipeLines (TCP) Q2 Earnings Beat, Revenues Surge Y/Y

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TC PipeLines, LP TCP reported second-quarter 2018 earnings of $1.00 per unit, surpassing the Zacks Consensus Estimate of 76 cents. Further, the bottom line also increased from 73 cents per unit recorded in the year-ago quarter. Higher equity earnings and increased revenues drove the results. Financing costs, incurred as a result of additional borrowings for a couple of acquisitions, partially offset the improvement. 

Quarterly transmission revenues of $111 million were nominally higher than $101 million recorded in the second quarter of 2017. The increase can be attributed to higher incremental long-term services sold by Gas Transmission Northwest.

Notably, following the clarified rulemaking by the Federal Energy Regulatory Commission on 18 Jul, TC PipeLines provided its negative impact range of $40-$60 million from the revised policies, down from previous estimation of $100 million.

As of 2 Aug, the company decreased its outstanding credit facility balance to $90 million, from previous balance of $140 million.  

TC PipeLines, LP Price, Consensus and EPS Surprise

TC PipeLines, LP Price, Consensus and EPS Surprise | TC PipeLines, LP Quote

Distribution & Cash Flow

TC PipeLines announced second-quarter 2018 cash distribution of 65 cents per unit, in line with prior-quarter figure but lower than the year-ago level of $1.00. The lowered distribution will enable the partnership to strengthen its balance sheet by utilizing the cash to repay debts.

Notably, this is the 77th consecutive quarterly distribution paid by the partnership. The distribution will be paid on Aug 15, 2018 to its unitholders as of record on Aug 6.

The partnership's total distributable cash flow increased 23.2% year over year to $101 million, primarily driven by an increase in net income coupled with reduced maintenance expenditure of Gas Transmission Northwest.

In the reported quarter, TC PipeLines distributed $47 million in cash compared with $68 million in the year-ago quarter.

Pipeline Systems' Performance

Great Lakes: The partnership generated earnings of $12 million from equity investment, higher than the prior-year quarter’s $6 million.

Northern Border Pipeline: Equity earnings at this pipeline totaled $15 million, in line with the prior-year quarter.

Iroquois: Equity earnings at this pipeline amounted to $9 million, higher than the prior-year figure of $3 million. TC PipeLines completed the acquisition of 49.3% interest in Iroquois from TransCanada on Jun 1, 2017.


Operation and maintenance expenses were $17 million in the quarter, in line with the prior-year quarter’s figure. General/administrative expenses came in at $1 million compared with the year-ago figure of $2 million. Property taxes remained unchanged from the year-ago level at $7 million. Depreciation charges fell to $24 million in the quarter from $25 million in the prior-year period. Financial and other charges in the quarter came in at $23 million, recording a year-over-year increase of 21.1%.

Balance Sheet

As of Jun 30, 2018, TC PipeLines had cash and cash equivalents of $51 million. The partnership had long-term debt of $2.3 billion, representing a debt-to-capitalization ratio of 66.3%.

Zacks Rank & Other Key Picks

Currently, Houston, TX -based TC PipeLines sports a Zacks Rank #1 (Strong Buy). Investors interested in the Energy sector can also opt for other top-ranked stocks like Canadian Natural Resources Limited CNQ, ConocoPhillips COP and Cheniere Energy, Inc. LNG. While Canadian Natural Resources sports a Zacks Rank #1, ConocoPhillips and Cheniere Energy both carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Calgary, Canada-based Canadian Natural Resources is an upstream energy company. The company’s top line for 2018 is anticipated to improve 35.3% year over year, while its bottom line is expected to increase more than 182%.

Houston, TX-based ConocoPhillips is an integrated energy company. The company’s top line for 2018 is likely to improve 14.1% year over year. In the last four reported quarters, the company delivered an average positive earnings surprise of 27.6%.

Houston, TX-based Cheniere Energy mainly focuses on liquefied natural gas-related businesses. The company’s top line for 2018 is anticipated to improve 25.9% year over year, while its bottom line is expected to increase more than 225%.

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