Trans Mountain vows to deliver better prices for Canadian oil `for years'

Calgary-based Meg Energy Corp. expects Canada's oil producers to get better prices “for years” as the industry starts using the expanded Trans Mountain pipeline that officially opened on May 1.

But the company predicts the pipeline will meet its capacity within five years and it doesn't expect to see another pipeline built any time soon.

“With (TMX) now complete, we anticipate ... differentials will remain narrow for years while Canadian egress remains unconstrained,” vice-president of marketing Erik Alson said on a conference call on Tuesday. “As an industry, there is a history of filling the available egress and I think that will happen again over time. There are various estimates out there for when that could occur — some as recent as two years, others within five or six. Our thinking is closer to the outer end of that time frame.”

Meg Energy chief executive Darlene Gates in a statement said the Trans Mountain expansion would reduce pricing differential volatility and improve the company's gross profit per barrel — or netbacks.

Owned by the federal government's Trans Mountain Corp., the 1,150-kilometre pipeline is part of an expansion project that twins an existing line built in 1953 connecting Alberta and British Columbia. Together, the two pipelines are expected to deliver about 890,000 barrels of oil per day.

Other oil producers have also said they expect the pipeline to improve conditions for Canadian companies.

Cenovus Energy Inc. on May 1 said it has its eyes set on a “pretty vast market,” and added that Canada needs to build more infrastructure to tackle its decreasing productivity. Canadian Natural Resources Ltd. on May 2 said the pipeline creates additional exporting opportunities on the West Coast, both by land and by water.

Alson said Meg Energy is looking to boost its existing capabilities by partnering with a global operator that has “extensive shipping capabilities.”

Meg Energy earned $98 million in its first quarter ending March 31, up from $81 million during the same quarter last year, according to its results released on Monday, but revenues dropped to $1.4 billion from $1.5 billion a year earlier. Diluted earnings per share were 36 cents, up from 28 cents. Bitumen production averaged about 104,000 barrels per day during the quarter.