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API Poll Fires Up Keystone XL Pipeline Debate: Top Picks

On Thursday, results of a poll published by the American Petroleum Institute (API) - the largest oil industry association in the U.S. - got both Democrats and Republicans fired up. Per the poll, the majority of Americans support the construction of TransCanada Corp.'s TRP Keystone XL pipeline that would connect Canada's oil sands to crude oil refineries on the Texas Gulf Coast. TransCanada had first applied for a presidential permit for the cross border pipeline in 2009.

API Poll

The random telephone survey was conducted between Sep 10 and Sep 13 among 907 registered voters. Of them, 32% identified themselves as Republicans, 32% were Democrats and 22% said they were Independents.

The telephone poll found that 68% of respondents unanimously support the building of Keystone XL. Also in the same poll 78% believe that Keystone XL would bolster economic security in the U.S. The agency also added that 66% are more likely to support a presidential candidate favoring the pipeline.

Keystone Pipeline: Backdrop

The Keystone XL pipeline, if approved, would connect the oil sands of Alberta to the U.S. Gulf of Mexico. TransCanada - the company building the conduit - would be the biggest gainer if any positive decision takes the pipeline out of the bottleneck.

The pipeline would run up to 1,179 miles and carry up to 830,000 barrels of oil per day. The $8 billion project would not only create jobs but would also be an economic driver for the nation, reducing dependence on foreign oil.

While the Calgary-based company has already invested billions in the pipeline project, it is waiting for the final nod from the Obama administration. But as the impasse over Keystone XL lingers, we remain concerned about its effects on TransCanada. The Keystone project was originally partnered between TransCanada and ConocoPhillips COP . In 2009, TransCanada had purchased its partners' stake, becoming the sole owner.

TransCanada's Fortunes Tied to Keystone Approval

We believe that in the prevailing weak crude pricing environment, a decision against building the pipeline would be a big loss for the nation. Oil will definitely need to be transported into the country, if not through pipelines, then by accident-prone rail routes. But building the pipeline at one go will drastically reduce the transportation cost of oil.

Keystone: Key to Presidential Race?

The ongoing run up for the presidential race flared up the Keystone debate. To date, barring a few, the usual tactics of political pundits was to stand on the sidelines. However, with the poll showing popular support toward the project, even Democratic presidential candidate Hillary Clinton is hard pressed to pick sides. This evidently boosts chances for the pipeline which already has a number of stern supporters like Donald Trump in the presidential race.

Keystone is also a major issue in Canada with the country's general elections slated in October itself. For Canada's energy-dependent economy already affected by the ongoing rout of crude prices, Keystone would be a focal point for becoming the biggest trading partner of the U.S.

We see the pipeline tussle as part of the run up to the presidential race. Regardless of whether or not the pipeline is approved by President Obama, there is ample trade between the Western Canadian Select (WCS) hub and the U.S. Gulf Coast. However, most of this capacity is now moving by the rail route.

The supporters of the pipeline are pushing for approval which they feel would pump multi-millions in revenues and plenty of jobs in the U.S. They also advocate that the pipeline would drag down oil transportation and provide a breather for oil firms hammered by the prolonged softness in crude pricing.

As the Keystone XL deadlock deepens, our apprehensions on the necessary approvals for the pipeline project continue to rise. There are companies whose fortunes are closely tied to the political game of Keystone. Let's take a look at some of these:

San Antonio, TX-based Valero Energy Corp. VLO is the first name that comes to mind. The company is slated to benefit immensely as a key customer of the Keystone XL Pipeline. Our bullishness stems from the company's refiners in the Gulf, which would see margins skyrocket once the tide of crude is shifted to Canada from dearer overseas sources. Valero Energy's logistics master limited partnership (MLP) - Valero Energy Partners LP VLP - is another of our top favourites.

Apart from Valero, the world's largest publicly traded energy company ExxonMobil Corp. XOM is also another stock for which we shall keep our eyes peeled. The energy giant's significant refining presence in the Gulf stands to see improved margins once the flow of Canadian sour crude rises. We feel that even if crude prices improve slightly, the company would still be able to boost its refining margins.

Finally in our list comes Findlay, OH-based Marathon Petroleum Corp. MPC with its extensive downstream presence. The company is the fourth largest domestic refiner with a combined crude oil processing capacity of approximately 1.7 million barrels per day through its portfolio of seven refineries. Of these, its Detroit refinery is strategically located with adequate capacity to take advantage of cheaper Canadian crude flow via the Keystone pipeline.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

VALERO ENERGY (VLO): Free Stock Analysis Report

CONOCOPHILLIPS (COP): Free Stock Analysis Report

EXXON MOBIL CRP (XOM): Free Stock Analysis Report

TRANSCDA CORP (TRP): Free Stock Analysis Report

MARATHON PETROL (MPC): Free Stock Analysis Report

VALERO EGY PTNR (VLP): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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