TransCanada May Be Eyeing Route to U.S. Shale Gas in Deal Talks

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Four months after saying a Keystone XL oil tube skeleton rebuffed, TransCanada Corp. might be prepared to enhance again in a U.S. — this time by shopping instead of building lines.

Canada’s second-largest tube user pronounced it’s in talks about a understanding with an unclear association after a Wall Street Journal reported it’s negotiating a intensity takeover of Columbia Pipeline Group Inc.

A takeover of Columbia would enhance Calgary-based TransCanada’s U.S. footprint, quite in a Marcellus and Utica shale plays, giving a association some-more than 15,000 some-more miles (24,140 kilometers) of healthy gas pipelines as good as subterraneous storage and estimate comforts owned and operated by Houston-based Columbia. TransCanada pronounced in Nov it might cruise an merger to enhance in a Marcellus.

“Directionally, CPGX’s resources are in a strategically appealing partial of North America where TransCanada does not have a footprint,” Robert Kwan, an researcher during RBC Dominion Securities Inc. in Vancouver, wrote in a investigate note. “The CPGX resources are generally adjacent to some of TransCanada’s incomparable gas resources including ANR and a Canadian Mainline pipes portion Eastern Canada.”

Columbia rose 15 percent to $22.72 as of 2:58 p.m. in New York. TransCanada shares were down 4.3 percent during C$47.10 in Toronto.

James Yardley, a orator for Columbia, declined to criticism in a write talk on “market rumors and speculation,” citing corporate policy.

No agreement has been reached and there is no declaration a talks will continue or that a understanding will be concluded upon, TransCanada said. The Wall Street Journal reported that a understanding could be reached in a entrance weeks, citing unclear people informed with negotiations. Columbia has a marketplace value of some-more than $9 billion and TransCanada is valued during about C$34 billion ($25 billion).

Shale Presence

“If there is a understanding with TransCanada, it provides Columbia with a appropriation they need within a most bigger company,” pronounced Rob Desai, an researcher during Edward Jones Co. in Saint Louis, Missouri. Columbia would differently need to  daub debt or equity markets to grow over 2017, he said. “Their incomparable projects are still dual to 3 years out.”

A understanding would also assuage financier concerns over TransCanada’s ability to grow over a prolonged term, given a immeasurable tube projects have been behind or blocked, Desai said. Columbia is a higher-growth association but large division commitments to shareholders, he said.

TransCanada has newly been focusing on small- to medium-sized projects to support a annual division expansion rate of 8 percent to 10 percent by 2020 as it struggles to win domestic support for large oil pipelines including Keystone XL and Energy East, a C$15.7 billion ($11.8 billion) plan to boat oil-sands wanton from Alberta to Canada’s Atlantic Coast.

The association has had a eye on removing a tube into a heart of a Marcellus, that stretches opposite Pennsylvania and tools of New York, Ohio and West Virginia. Russ Girling, TransCanada’s arch executive officer, pronounced on Nov that a association might cruise an merger to grow a Marcellus business. It’s cheaper for existent players in that segment to build capacity, he said.

Mainline Woes

Efforts to enhance in a Marcellus come as TransCanada sees dramatically reduced flows on a Mainline gas complement from Western Canada into a nation’s eastern markets, as immeasurable reserve of inexpensive gas from Appalachian fields are pulling north. TransCanada has been seeking blurb support for a intensity annulment of a Iroquois pipeline, that has been promulgation Western Canadian gas reserve to a eastern U.S. for some-more than dual decades, as U.S. producers find new buyers for their fuel in eastern Canada.

The Appalachian segment is one of a few places where it’s still essential to deposit in gas lines as prolongation has continued to bang there. The Marcellus will produce 17.4 billion cubic feet a day this month, 2 billion some-more than a U.S. Energy Information Administration had formerly forecast. While a series drilling rigs targeting gas has plunged to 0 in fields from North Dakota to Oklahoma, there are still 40 using in a Marcellus and Utica, Baker Hughes Inc. information show.

TransCanada in Jan non-stop one of a largest trade appeals ever brought opposite a U.S., seeking to replenish $15 billion of costs and indemnification tied to a Obama administration’s rejecting of a Keystone XL oil pipeline. The association also sued a U.S. supervision over a rejection of a $8 billion cross-border project.

Keystone XL, that would couple Canadian wanton reserve with U.S. Gulf Coast refineries, is among about $27 billion of large-scale oil and gas pipelines TransCanada is seeking to build over a prolonged term.

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