Propane terminal expansion predicted as AltaGas releases third-quarter results

CALGARY — Strong operating and financial performance by Canada’s first propane export terminal on the West Coast means its output stands to continue to grow through next year, the CEO of owner AltaGas Ltd. says.

The facility has reached target capacity of 40,000 barrels per day after five months of operation and is expected to grow to its ultimate nameplate design of 80,000 bpd as more propane supply is procured, said CEO Randy Crawford on a conference call on Wednesday.

He wouldn’t give specific 2020 output targets.

“Our fundamental assumption, underlying our midstream strategy, is that the marginal molecule of natural gas and natural gas liquids in Canada will need to be exported, not to the U.S., but to Asia,” he said on the call to discuss third-quarter results.

“The growing demand for energy in Asia will be a driving force behind our Canadian midstream business. Leveraging our first-mover advantage as the first and only company with the capability to export LPG (liquid petroleum gas) from Canada to Asia is paramount to attracting more volumes to our system and ultimately driving growth across our integrated platform.”

Ridley Island is the first of three propane export terminals proposed for Canada’s West Coast. Pembina Pipeline Corp. is building a smaller 25,000-bpd terminal at nearby Prince Rupert, expected to start exporting propane in mid-2020. A 46,000-bpd terminal has been proposed by Pacific Travers Energy for Kitimat, B.C.

AltaGas owns part of privately held Petrogas Energy Corp., which ships Canadian propane and butane to Asia and Latin America from its 35,000-bpd marine export terminal in Washington state.

Ridley Island shipped more than three million barrels of propane to Asia in the third quarter ended Sept. 30, filling a total of six ships.

Crawford said the facility’s adjusted earnings of $37 million equate to about $11 per barrel, adding propane in Asia receives a price premium over North American benchmarks.

AltaGas reported revenue fell to $888 million in the three months ended Sept. 30 from $1.04 billion in the same period of 2018, due in part to business shrinkage from about $2.2 billion in asset sales over the past year, as well as a Virginia regulator’s rejection of a natural gas utility rate increase.

The Calgary-based utility and midstream company said it earned $22 million for the quarter ended Sept. 30 compared with a loss of $726 million a year ago.

On a normalized basis, AltaGas says it lost $58 million for the quarter compared with a loss of $17 million a year ago. Normalized earnings before interest, taxes, depreciation and amortization came in at $178 million, versus $226 million in the third quarter of 2018.

Analysts had forecast a normalized net loss of $27 million on revenue of $1.026 billion and normalized EBITDA of $185 million, according to financial markets data firm Refinitiv.

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