IPL Leak Impact on Canadian Oil

Why even after a pipeline leak and the pandemic we see strong entry points right now

Andrew Willis 23 September, 2020 | 1:48AM
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Andrew Willis: At the end of last month, Inter Pipeline detected a leak on its Polaris pipeline near Fort McMurray, Alberta. With uncertainties as to the cause, and how long it will take to restart, it reminded us of the vulnerabilities of the oil sector – although I doubt most of us needed that this year.

It also reminded us to check on the state of the industry as a whole, for we found that the Polaris pipeline fed into operations with other oil Canadian oil giants such as Imperial Oil (IMO) and Husky Energy (HSE). And things look okay!

Senior equity analyst Joe Gemino doesn’t expect the leak to impact his fair value estimates for Inter Pipeline (IPL), or Imperial Oil. As for Husky Energy: we’re still unsure whether they’ll be affected, but we are certain of one thing. The stock is undervalued.

Trading around 40% below its fair value, it reminds us that the market can underestimate a company’s ability to generate cash from a variety of revenue streams and geographical locations, and that it will take time for the positive sentiment to come around.

But for long term investors, these near term uncertainties pale in comparison to the years of profit potential in return for practicing pipeline patience.

For Morningstar, I’m Andrew Willis.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Imperial Oil Ltd94.96 CAD-1.66

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar Canada. He previously produced content for Fidelity Investments and finance industry events for Euromoney Institutional Investor and has written in the past for Thomson Reuters and CNN. Follow him on Twitter @Andrew_M_Willis.

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