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TransCanada Drafts $2B Expansion Plans for NOVA Gas System

Zacks Equity Research

Canadian pipeline operator TransCanada Corporation TRP recently announced plans to invest $2 billion over the next four years for the expansion of NOVA Gas Transmission Ltd (NGTL) system in Canada. The natural gas gathering pipeline system is a core asset of the company. The company is focusing on optimizing the competitive position of NGTL system to transport more fuel from the lucrative Canadian fields.

The expansion project will add to the company’s total near-term $5.1 billion investment in the NGTL system.  The expansion includes an additional 273 kilometers of pipeline, 150 megawatts worth of power for compressors and a host of other infrastructure development plans. TransCanada’s new supply contracts to ship over 2.6 million cubic feet of natural gas per day are likely to provide an impetus to the pipeline capacity expansion program.

TransCanada has undertaken the expansion program to meet the growing demand of producers for additional pipeline capacity in the Montney, Duvernay and Deep Basin due to shipping constraints. Montney, especially, is an emerging economic region which will help Canadian producers to compete with American gas producers. Horizontal drilling and hydraulic fracturing technology have made the region an attractive natural gas play in Canada. However, producers remain concerned about the insufficient pipeline space.

The pipeline capacity expansion will help to connect Western Canadian natural gas production to key markets within Deep Basin and across North America. TransCanada also recently completed an open season in which producers agreed to transport additional gas through Pacific Northwest system into California and Nevada.

TransCanada will file the applications for the expansion projects with National Energy Board in the fourth quarter of 2017. Subject to regulatory approvals, the construction will commence from early 2019. While initial projects will come online by the end of 2019, final projects would become operational by mid-2021.

Zacks Rank & Key Picks

TransCanada is engaged in the natural gas transmission and power services. The company’s pipeline transports the majority of Western Canada's natural gas to growing markets in Canada and the U.S.

TransCanada, under zacks categorized under Oil & Gas Production and Pipelines, carries a Zacks Rank #3 (Hold).

TransCanada Corporation Price


TransCanada Corporation Price | TransCanada Corporation Quote

Some better-ranked players from the broader energy space include McDermott International, Inc. MDR, Legacy Reserves LP LGCY and W&T Offshore, Inc. WTI. While McDermott sports a Zacks Rank #1 (Strong buy), Legacy Reserves and W&T Offshore carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

McDermott reported positive earnings surprise in each of the last four quarters, the average being 387.50%.

Legacy Reserves reported a positive average earnings surprise of 11.84% in the preceding four quarters.

W&T Offshore reported positive earnings surprise in each of the last four quarters, the average being 69.21%.

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