Washington, 25 July (Argus) — Canadian Pacific (CP) today shortened by a year its timeframe to grow crude-by-rail volumes to 70,000 carloads/yr, putting its new target at 2013 during an earnings call today.
The momentum in the market “exceeds our earlier expectations,” with growth skyrocketing from just 13,000 carloads in 2011, according to CP chief marketing officer Jane O'Hagan.
The Calgary-based railroad has raised expectations for its shipments with former Canadian National (CN) chief executive Hunter Harrison taking the helm of the service-challenged CP last month. A hedge fund's proxy fight ousted Fred Green from the position in May.
“We have expanded [crude] origins to include not only the Bakken and the light sweet crude, but also [to] look at the mid-grade and to look at the heavy grade Canadian market,” she said.
Harrison said the crude-by-rail market “just continues to expand on a daily basis” and the railroad is modeling the market against its capabilities to determine where to use manifest trains and where unit train shipments are appropriate. He said the crude-by-rail business should grow at twice the rate of Canada's GDP for the next few years.
Harrison is known for the improvements he made at CN that made it one of the most efficiently run railroads in North America. He said the railroad can benefit from changes in how it assigns it train crews. CP's crew alignment “basically is the same system from 100 years ago.” By increasing the boundaries that train crews can operate from 120-130 miles per district to 180-190 miles, the railroad can improve efficiency and transit time while helping its employees' quality of life, he said.
“My confidence has been bolstered even further … there is a lot of talent here in this organization,” Harrison said.
CP's second quarter profit fell 24pc to C$103mn on a year-over-year basis amid costs for its management change, lost business and higher costs stemming from a nine-day strike in May by its Canadian operating employees that followed changes in the company's board of directors.
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