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British Columbia mega-project watch: Ways to play Site C and proposed LNG projects

Peter Kennedy Peter Kennedy, Stockhouse
5 Comments| July 18, 2014


Major players are gearing up to supply equipment and services to a handful of British Columbia mega-projects that could be developed over the next several years.

They include Enbridge Inc.’s (TSX: T.ENBStock Forum) proposed $7.9 billion North Gateway pipeline, the $8 billion Site C hydro-electric dam, and 15 Liquified Natural Gas (LNG) export projects that are currently on the drawing board.

It is far from certain yet that any of these projects will be allowed to proceed.

However, analysts from PI Financial are taking an optimistic view and recently flew to Northeastern B.C. to get a closer look at potential opportunities that may flow to suppliers of equipment and services to the Site C dam and operators at the Septimus and Montney natural gas fields.

 “The entire Montney region has been very active as many major oil and gas companies have been actively drilling in anticipation of LNG final investment decisions on B.C.’s west coast,’’ wrote PI Financial analyst Jason Zandberg in a research report.



The hope is that the Septimus and Montney fields will emerge as ground zero for future LNG operations, producing natural gas that would be piped to the west coast, loaded onto ships, and transported to markets in Asia.

PI currently has buy ratings on four companies that are expected to benefit from this activity, including:

Petrowest Corp. (TSX: T.PRW, Stock Forum), which was trading Friday at $1.36, leaving a market cap of $203.7 million, based on 149.8 million shares outstanding. PI has set a target of $1.70 for the stock.

Enterprise Group Inc. (TSX: T.E, Stock Forum), which traded at 90 cents, leaving a market cap of $132.4 million, based on 145.5 million shares outstanding. PI has set a target of $1.50 for the stock.

Macro Enterprises Inc. (TSX: V.MCR, Stock Forum), which traded at $4.51, leaving a market cap of $136 million, based on 30.2 million shares outstanding. PI has set a target of $7.50 for the stock.

ENTREC Corp. (TSX: V.ENT, Stock Forum), which traded at $1.46, leaving a market cap of $165.2 million, based on 112.4 million shares outstanding. PI has set a target of $1.90 for the stock.

Readers should note that the buy ratings come with a qualifier stating all risk ratings associated with these stocks are ABOVE AVERAGE.

The Site C dam, if approved, should be a very large catalyst for Petrowest, Zandberg said. “Of the $8 billion cost to build the dam, it is estimated that over $1 billion will be earthmoving work.”

“There will be a phase of early works projects that will happen before the actual construction of the dam,’’ Zandberg said. “These early works projects consist of road building and site clearing and Petrowest should be a front runner for these projects.’’

The PI report also notes that a right of way for a proposed 500 kilowatt power lines from the Site C dame to the Peace Canyon Power Station will need to be cleared and mulched, a scenario that will also provide a potential opportunity for Petrowest, following its recent acquisition of Enviro-Mulch Land Clearing Solutions Ltd.

“Mulching along pipeline corridors could also be a significant opportunity given the large inventory of potential pipeline projects in B.C.,’’ Zandberg wrote.

He also sees opportunities for Enterprise Group as a result of the company’s efficient transportation and dismantling of well-site infrastructure. “We feel this is a significant competitive advantage as well as a cost savings for Enterprise Group,” PI said.

For its part, Macro Enterprises is poised to capitalize on future facility and pipeline work, based on its very large inventory of equipment.

ENTREC is engaged in heavy lift and haulage services with offerings that include crane services, transportation and logistics. As a result, the company is expected to benefit from activity in Northeast B.C., as it has the relationships, equipment and reputation to drive future business, PI said.

During a helicopter tour of the over the Site C dam location and nearby gas fields, the PI analyst said he was surprised by the level of drilling activity and continues to believe that the region will continue to develop in anticipation of LNG facilities on B.C.’s west coast.

Speaking to Stockhouse, Zanberg said Enbridge’s proposed Northern Gateway pipeline, which would transport crude – mostly oil sands bitumen -- from Alberta to the West Coast to Asian markets is a much longer term proposition. “I do think it will get built,’’ he said. But he doesn’t think that it will happen in the near future.

“There is so much pushback on oil pipelines.”

However, he said companies involved in 15 proposed LNG projects will get more clarity in November when the B.C. government is expected to reveal more information about of the key costs associated with these projects, including taxes, revenue sharing and economic spinoffs to First Nations.


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Comments

Sophia123
I dunno about the Enbridge Northern Gateway Pipeline thingy. Seemz a LOT of First Nation people against it and stuff. The recent sparrow decision by the BIG supreme court kinda gave First Nationz a HUGE trump card and stuff. Peter Kennedy kinda left that importent stuff outa the stuff about BC natural gas and stuff. Who cares what PI Financial group saw from the whirley bird. Did ANYONE talk to the Natives??? Nope. huh. Economics is one thing the Supreme Court is quiet another huh??? ...
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July 19, 2014
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BaystreetBenny
Watch RPX.v Just Raised $3M @ $0.05 a few weeks ago....Summer LOW Trading @ $0.02..Crazy ! 21,000 meter Drills Program NOW Underway....Drills Turning on Massive VMS property .Drill Results from first 3,000m will Soon Start Rolling IN. Getting Active last week
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July 19, 2014
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Acelove
Excellent writeup Peter Kennedy! Lots of investors will be very interested in this!
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August 17, 2014
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4SeasVentures
Infrastructure. ..example...aggregates for ready mix ( concrete). Largest and closest deposit to rupert and is currently preparing for production (late August 2014)....HBK...Highbank Resources.
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July 19, 2014
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GreenSideUp
Stick with "E" & have bit of patience.Small for the moment but Solid company with good future....
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August 15, 2014
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