Although oil and gas prices have risen in the past year, optimism in the industry has not. Kinder Morgan Canada Ltd (TSX:KML) announced recently that it would be suspending non-essential work on its controversial Trans Mountain pipeline expansion. The project has been opposed by the B.C. government and Kinder Morgan has decided to back away as a result.
The Alberta government has remained supportive and Premier Rachel Notley stated that even if the pipeline loses support, that “If we have to, Alberta is prepared to do whatever it takes to get this pipeline built.”
The problem for investors is that yet again we are seeing a lot of negativity around pipelines and their potential expansion. Last year, TransCanada Corporation (TSX:TRP)(NYSE:TRP) announced that it would be cancelling the Energy East pipeline after the scope of costs to be considered in the National Energy Board’s review were expanded, which no longer made the project viable.
It’s no surprise then that oil and gas stocks have failed to gain much momentum even in the midst of a rising price of oil, as companies in the industry continue to face big challenges in Canada. Even though the Keystone XL received approval under the new U.S. administration, that too has failed to generate much momentum among Canadian oil and gas stocks.
Kinder Morgan’s stock dropped 12% on the news of its decision, and while it may be tempting to buy on the dip, the danger is that the decline may not be over. TransCanada’s stock has also struggled in the past year with its share price declining more than 16%.
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