Kansas City Southern gains on potential crude terminal deal

Wed Feb 27, 2013 1:56pm EST
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Feb 27 (Reuters) - Shares of Kansas City Southern rose as much as 10 percent on Wednesday on hopes that the fourth-largest U.S. public railroad operator was close to a deal to build a crude terminal in Port Arthur, Texas.

"Demand appears sufficient to support the development of a terminal in the near term and ... we think an announcement could come as soon as the next three months," Credit Suisse analyst Allison Landry wrote in a client note on Wednesday.

The company said last week it was in "very serious negotiations with a third party to build a facility" to receive heavy crude from western Canada and from the Bakken shale field in North Dakota and Montana.

"If this facility is built ... it would take multiple-unit trains of product a day, (which) would be kind of a game changer for Kansas City Southern," company spokesman Bill Galligan said at a Barclays conference in Miami on Feb. 20.

Oil and gas production from shale formations in North America has surged over the past two years, leading to a scramble to get supplies to refining hubs.

Kansas City Southern did not name the company but said it was one "that already has a network in the United States, both on the east coast and the west coast, and they wanted a Gulf facility too."

Savage Cos said in April 2011 it entered into a joint development agreement to construct a large multi-user rail terminal in Kansas City Southern's Port Arthur center. .

Kansas City Southern did not respond to requests seeking comment. Savage could not be immediately reached.

The company's shares were up 7 percent at $104.86 Wednesday afternoon on the New York Stock Exchange. (Reporting by Sagarika Jaisinghani in Bangalore; Editing by Don Sebastian and Saumyadeb Chakrabarty)