Canada's pipeline companies, long considered the stalwarts of the energy sector, are starting to feel the pinch of the oil slump.
While midstream companies such as pipeline operators are insulated from any direct fallout from low crude prices, they can't completely sidestep headwinds from prices hovering just above $40 (U.S.) a barrel.
Growth plans for future years might be tempered, analysts say, and jobs are already being lost.
On Monday, Enbridge Inc. announced it has cut 500 full-time jobs and 100 unfilled positions, representing 5 per cent of its work force.
TransCanada Corp., which cut one-fifth of its senior executive ranks in September, will complete its restructuring, including more job reductions, by the end of the month.
Those companies still hope to proceed with major projects to get Canadian oil-sands crude to international markets, including TransCanada's $12-billion cross-Canada Energy East project, or Enbridge's expansion of its cross-border Alberta Clipper line.
However, with a slowing rate of oil-sands growth – mostly as a result of low oil prices – big pipeline projects beyond those currently proposed are increasingly unlikely.
"Part of development is bringing new projects in the door and, to some extent, it looks like the rate of new projects coming in the door has gone down with commodity prices," said Steven Paget, an analyst at FirstEnergy Capital Corp.
"Now we're still seeing new projects come in, but I don't think anyone is … going to propose a new pipeline out of Western Canada for oil any time soon."
TransCanada shares have fallen this year, closing at $42.48 Tuesday, down from levels around $57 at the start of the year. Enbridge shares, currently at $49.63, are down from around $60 at the start of the year.
The news is not all gloomy.
TransCanada insists the restructuring allows it to be a more nimble organization, to grow the different segments of its business and to increase shareholder value. During its investor day on Tuesday, TransCanada chief financial officer Don Marchand said it still expects its dividends to grow at a rate of 8 to 10 per cent annually to the end of the decade.
By the end of 2018, the company said a focus on $13-billion in small- to medium-sized growth projects – including an expansion to the NGTL System and $2-billion of Mexican natural gas pipelines – are poised to enter service and begin contributing to earnings and cash flow. He insisted the U.S. rejection of Keystone XL on Nov. 6 didn't have any impact on how the company is viewed by rating agencies.
The pipeline company says it is at or near capacity on key pipeline routes and its pricing, or the tolls it is able to charge for transporting crude, are not significantly affected by short-term commodity prices.
However, TransCanada spokesman Mark Cooper said that, out of concern about the competitiveness of pipeline tolls, the company will find ways to provide lower-cost services to its customers.
Mr. Paget said it appears TransCanada could reduce some of the tolls it charges on pipelines in the years ahead. "This is about reducing costs on a multiyear basis," he said.
Mr. Marchand said a total accounting of the cost savings will come at the end of the year. "We are right in the middle of this right now. We can't actually quantify it today."
Regulatory uncertainty – in large part related to environmental opposition to some proposed pipeline projects – continues to weigh on TransCanada. "There is no doubt that there are impacts to our business from delays. But the reality of the situation is that we must find a way to adjust to this climate," Mr. Cooper said.
Enbridge said volumes on its pipelines are normal to high. Spokesman Graham White did not give details about why the company needs to slash jobs, other than to say that it's not immune to commodity-price downturns.
He added that capacity demand can actually increase with lower prices since consumers are still buying, and pricing for Enbridge is not affected because of fixed rates and tolls, some of which are fixed until 2021.
This month, Enbridge reported a third-quarter loss of $609-million, largely related to the company's completion of its drop-down – the decision to shift Canadian pipelines and wind farms into Enbridge Income Fund Holdings Inc. – and costs related to a change in the value of derivatives.
Aside from low oil prices, Enbridge is in regulatory limbo over expansion of its cross-border Alberta Clipper line – which like the now-rejected Keystone XL project, requires U.S. State Department approval. That process has been delayed. And the company's Northern Gateway pipeline project faces fresh uncertainty in the wake of the new Liberal government's promise to formalize a ban on tanker traffic off the British Columbia northern coast.