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Oct 16, 2018

Tank provider Gibson jumps amid Canadian crude woes

BNN Bloomberg's commodities update: Oct. 16, 2018

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Gibson Energy Inc. surged the most in more than a year after announcing a plan to build 1 million barrels of new oil-tank space in Western Canada, underscoring how the crude storage and transportation provider is poised to benefit from the nation’s pipeline shortage.

The company said on Monday that it will build two 500,000-barrel tanks at a terminal in Hardisty, Alberta, by the first quarter of 2020. The project is backed by a long-term agreement with an unidentified oil sands company. The shares climbed as much as 9.2 per cent, the biggest intraday gain since August 2017.

The project illustrates how Gibson may gain as a surge of new oil sands supply is running up against limited space on export pipelines. The situation has pushed inventories in the region to all-time highs and sent the price of Western Canadian Select crude down to US$20 a barrel last week, the lowest in more than two years.

“Gibson is the best positioned in our coverage to benefit from wide differentials driving heightened demand for storage infrastructure and robust crude oil marketing contribution,” Bank of Montreal analyst Ben Pham said in a note. He raised his rating on the shares to outperform, the equivalent of a buy.

Gibson’s new tanks represents the third phase of a seven-tank project that will add a total of 3.1 million barrels of storage at Hardisty, Western Canada’s oil storage hub. With the new phase being sanctioned, Gibson increased its budget for growth capital spending this year to $275 million to $325 million.

Chief Executive Officer Steven Spaulding, who took the position in June 2017, has begun selling off non-core operations like the company’s U.S. environmental-services business to focus on providing oil infrastructure. He’s still looking to sell Gibson’s natural gas liquids wholesale unit as well as its Canadian trucking and environmental-services businesses.