Energy pipelines back in investor favor after Trump orders

Fri Jan 27, 2017 6:02pm EST
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By Devika Krishna Kumar and Catherine Ngai

NEW YORK (Reuters) - Investors have rushed back into North American pipelines after U.S. President Donald Trump revived growth prospects in a sector that struggled to cope with a two-year oil price slump and strident opposition from environmental and Native American activists.

Investor confidence in the industry was shaken last year when the administration of former President Barack Obama halted the $3.8 billion Dakota Access Pipeline, just as Energy Transfer Partners (ETP.N: Quote) had nearly finished building it. Protesters have rallied for months against plans to route the Dakota Access pipeline under a lake near the Standing Rock Sioux reservation in North Dakota, saying it threatened water resources and sacred Native American sites.

A year earlier, Obama rejected TransCanada Corp's (TRP.TO: Quote) C$8 billion ($6.08 billion) Keystone XL project, which would ship oil from Canada to U.S. refiners.

Trump sought to smooth the way for both projects with executive orders on Tuesday as he made good on campaign promises to drive infrastructure investment throughout the world's largest economy.

The orders sparked a rally in indices that track pipeline companies to a more than 14-month high.

The shares of firms that build the pipelines and storage tanks such as Magellan Midstream Partners (MMP.N: Quote) and Enterprise Products Partners (EPD.N: Quote) have rallied as much as 9 percent in the days following Trump's orders.

Those gains came on top of a rally of about 13 percent in these firms since Trump's surprise election victory on Nov. 8.

"Energy companies can invest more confidently over the next four years with less concern over federal delays," said Libby Toudouze, a portfolio manager at Cushing Asset Management. The firm manages around $2.7 billion of investments in pipeline and energy transport and storage firms.   Continued...

Deer gather at a depot used to store pipes for Transcanada Corp's planned Keystone XL oil pipeline in Gascoyne, North Dakota, January 25, 2017.  REUTERS/Terray Sylvester