TC Energy reported a fourth-quarter 2022 loss of CA$1.48 billion ($1.09 billion), attributed to costs connected to a rupture in the Keystone pipeline in December that spilled about 12,900 bbl of crude oil in Washington County, Kan. The company also recorded a $2.6 billion impairment charge related to construction of the Coastal GasLink pipeline.

However, the Canadian pipeline giant beat analyst estimates with comparable earnings per share (EPS) of $1.11 compared to the consensus estimate of $1.09/share. For full-year 2022, EPS totaled $4.30 on $4.3 billion in comparable net income, up slightly from $4.14 billion in 2021. 

François Poirier, TC Energy’s president and CEO, touted record financial results during an earnings call with analysts on Feb. 14, including 5.7% year-over-year growth in comparable EBITDA and strong financial results in the company’s liquids pipelines, and power and energy solutions units.

Comparable EBITDA for the fourth quarter rose 12% year over year. Comparable full-year EBITDA totaled $9.9 billion, with company guidance for an increase of 5% to 7% in 2023.

Setbacks

An analysis of the Keystone pipeline rupture determined that a faulty weld connecting two segments of pipe and bending stress fatigue led to a crack that caused the spill on Dec. 7. Keystone’s capacity is 622,000 bbl/d.

“Serious events such as this are never acceptable,” Poirier told analysts, but he noted that it took only seven minutes from initial detection to shut down the pipeline.

Most of the system was back in service within seven days, and the damaged segment was repaired and restarted within three weeks, he said. About 90% of the oil spilled has been recovered.

Poirier also assured analysts that TC Energy would continue to fulfill contractual commitments and did not anticipate a material financial impact on its 2023 comparable EBITDA outlook.   

TC Pipeline Trouble Spots
The Coastal GasLink Pipeline project and Keystone Pipeline spill were negatives in an otherwise positive TC Energy earnings report. (Source: Rextag, TC Energy)

The cost estimate for the Coastal GasLink project jumped to $14.5 billion from the previous $11.2 billion estimate in November. It will ship natural gas to the LNG Canada terminal in Kitimat, B.C., a $40 billion project that is two to three years from shipping LNG.

Among the issues driving up costs for Coastal GasLink are shortages of skilled labor, contractor underperformance and disputes, and natural challenges including drought, erosion and sediment control. Seasonal construction constraints and unexpected delays could push the project’s completion well into 2024, which could elevate the total cost by an additional $1.2 billion.

Outlook

TC Energy plans to move forward with its more than $5 billion asset divestiture program in 2023.

Poirier said the purpose is to provide funding for the company’s portfolio along with growth opportunities, while accelerating deleveraging. 

The company exited 2022 with a debt/EBITDA ratio of 5.35x, said Joel Hunter, executive vice president and CFO. Asset sales are among the ways to reduce the ratio to 5x in the next 12 months, he said, with the ultimate goal of bringing it down to 4.75x.

Also:
•    Capex is expected to be in the $11.5 billion to $12 billion range, mostly on the NGTL System, Southeast Gateway pipeline and Coastal GasLink;
•    About $6 billion of projects will go into service in 2023;
•    Higher contributions are expected from the Mexico Natural Gas Pipelines segment; and
•    Lower contributions are expected from Keystone as a result of the spill.

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