Concerns about the solvency of some Alberta oil producers has prompted a regional pipeline company to warn it may seek liens on the crude in its lines to secure payment.
Inter Pipeline Ltd. is also asking shippers whose credit rating has dropped below investment grade to supply it with letters of credit, the Globe and Mail reports. Inter Pipeline’s customers are mainly smaller tar sands/oil sands producers, but also include bigger players such as Imperial Oil Ltd.—which reported sagging quarterly profits and revenues last month—and Cenovus Energy Inc., which had its holdings downgraded to junk status by Moody’s Investors Service.
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Cash flow worries have radiated out from global crude markets for months. Earlier this month, a U.S. court ruled that Texas-based Sabine Oil & Gas Corp. could use Chapter 11 bankruptcy protection to walk away from some of its pipeline contracts. A judge’s decision on a similar case in Delaware was expected by the end of this month.
Some pipeline and oil and gas processing companies, the paper reports, “are going a step further, eyeing possible royalty stakes in producer lands,” in exchange for tying wells in to their collection networks.
For the moment, big main-stem pipeline operators insist their order books are robust, bolstered by long-term ‘take-or-pay’ contracts. Enbridge Inc., for one, projects that by 2012, Western Canadian pipelines will be short half a million barrels per day of capacity, as tar sands/oil sands facilities now under construction begin production.
By contrast, the Globe notes, “More than 90% of [Inter Pipeline’s] 2015 earnings were tied to fee-based or cost-of-service contracts.”
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