TEXT-S&P on North American railroads, shale-related traffic
Nov 16 - Standard & Poor's Ratings Services estimates that shale-related commodities will represent approximately 5% of the total volumes transported by the North American freight railroads in 2012. We expect shale-related volumes in the railroad sector to continue to grow meaningfully through 2014. However, we believe it will only partly offset the effects of a sluggish economy and weaker volumes in certain key commodities (such as coal and agriculture), according to a report published today on RatingsDirect titled, "Shale-Related Traffic Will Likely Increase For Large North American Railroads, But Ratings Should Hold Steady." Over the past few years, due to technological advancements in hydraulic fracturing and deep water drilling, the U.S. has benefited from a surge in natural gas and oil production. In addition, low natural gas prices and new environmental regulations have led to increased demand for natural gas. The shift to natural gas as an alternate energy source has hurt utility coal volumes, which are mostly transported on railroads. Overall, we don't expect the North American shale energy boom to have a significant impact on the credit quality of large Class I railroads. Our outlook for the railroad sector anticipates flat to modest revenue growth over the next few quarters. We believe the railroads will continue to manage expenses and demonstrate strong operating efficiency and pricing discipline to generate stable earnings and cash flow, and credit metrics that are acceptable for the ratings. The report is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to email@example.com. Ratings information can also be found on Standard & Poor's public Web site by using the Ratings search box located in the left column at www.standardandpoors.com. Members of the media may request a copy of this report by contacting the media representative provided.