Oil rout spurs Canadian Pacific to cut shipments forecast
NEW YORK/CALGARY (Bloomberg) -- Canadian Pacific Railway Ltd. cut its forecast for moving crude by rail for a second time in four months because of production delays and lower demand for the commodity.
This year’s total will probably be 100,000 to 140,000 carloads, Chief Operating Officer Keith Creel said Wednesday. Canadian Pacific had forecast 140,000 in January, a reduction from its original outlook of 200,000.
“The 140,000 number is a question mark, I’ll just be honest about it,” Creel said at a Wolfe Research conference in New York. “We thought we were being conservative when we went from 200 to 140. The world has changed around all of us.”
The prospect of an even steeper slide in oil shipments showed the widening fallout from the rout in crude prices, which have tumbled 45% since a 2014 peak of $107.26/bbl. In the U.S., first-quarter oil carloads fell 14% from the fourth quarter, the Association of American Railroads said Wednesday without giving a tally for the Canadian carriers.
Even with the lower number of carloads the company is sticking with the 2015 outlook provided in January, Creel said. Profit is forecast to rise more than 25% on a per-share basis, and the operating ratio will be less than 62%.
Canadian Pacific rose 1.8% to close at C$215.85 in Toronto. That trimmed this year’s decline to 3.5%.
Two customers, Exxon Mobil Corp. and Plains All American Pipeline LP, will send less crude by rail than first expected, Creel said. Exxon’s facility in Edmonton, Alberta, will rely more on pipelines, while shipments from Plains’ Kerrobert facility probably won’t start until September or October, rather than July or August, he said.
“With those two headwinds, is 140 possible? Maybe,” Creel said. “It’s not, to me, going to be south of 100, based on the run rate that we see, and with some of that business coming online. So somewhere in between is what I would guesstimate.”
--With assistance from Robert Tuttle in Calgary and Thomas Black in Dallas.
