Oil has continued to languish (at least for most Canadian heavy oil producers) of late, providing investors hoping for capital appreciation in this sector with little in the way of a tailwind, unlike
peers operating the U.S. or Europe.
Canadian heavy oil has been punished by the market in recent quarters, with the heavy-light discount increasing to its widest range in percentage terms in years. Much of said discount has been linked to the lack of pipeline capacity which has plagued producers, as excess supply continues to build up in Canada and the buying power of many large refineries in the U.S. dictate oil prices they are willing to pay for the lower-quality Canadian crude.
For companies such as Inter Pipeline Corp. (TSX:IPL), however, the necessity of pipelines within the overall Canadian economy has begun to spur interest in such firms as investment opportunities, given the fact that capacity levels are currently being tested by Canadian producers, increasing the importance of pipelines and improving the long-term outlooks of such companies in terms of their ability to negotiate even better capacity contracts with producers.
Inter Pipeline currently operates a series of pipelines with a capacity of approximately 2.3 million barrels of oil per day. The company also operates a smaller network of oil pipelines in Western Canada, as well as some storage terminals in Europe, making this company a more diversified option for investors considering energy infrastructure firms overall.
With improving sector fundamentals expected to support the company’s yield of more than 7%, I like Inter Pipeline in this current environment.
Invest wisely, my friends.
