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TEXT-S&P on North American railroads, shale-related traffic
November 16, 2012 / 4:06 PM / 5 years ago

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

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 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 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 
Members of the media may request a copy of this report by contacting the media 
representative provided.

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