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TC Energy profit beats as demand boost offsets Keystone spill costs

Illustration shows smartphone with TC Energy's logo displayed

By Arshreet Singh and Nia Williams

(Reuters) - TC Energy Corp beat estimates for fourth-quarter profit on Tuesday as sustained energy demand helped soften the impact of a C$650 million charge for an oil spill on its Keystone pipeline and cost overruns on its Coastal GasLink project.

Regulators have ordered the 622,000 barrel-per-day Keystone pipeline to run at lower pressure as investigations into the 12,937-barrel leak in rural Kansas continue.

TC said the pipeline is running at 94% capacity. The company is able to deliver all its contracted volumes, but it is not offering spot shipments of crude.

The company expects insurance will cover the C$650 million ($486.13 million) environmental remediation charge, but additional costs may accrue as clean-up continues. TC has more than 800 people still in the field in Kansas, and said 90% of the oil has been recovered.

A preliminary investigation released last week said a combination of factors including bending stress on the pipe and a weld flaw may have led to the leak.

"The evidence is suggesting this is a localised issue but we're still taking a systematic approach to assessing our risk and our engineers are actively evaluating across the Keystone system where similar circumstances could potentially occur," Richard Prior, TC's president of liquids pipelines, said during an earnings call.

Calgary-based TC also recorded a C$3 billion impairment on its equity investment in the Coastal GasLink pipeline due to cost overruns. The pipeline will serve Canada's first liquefied natural gas project, Shell-led LNG Canada in northwest British Columbia.

Earlier this month, TC hiked cost estimates for the 670-km (416-mile) pipeline project by 30%, citing a number of factors including labour shortages, contractor underperformance and drought conditions.

With results coming in close to estimates and "the fireworks out of the way" after the Coastal GasLink cost update, RBC Capital Markets analyst Robert Kwan said in a note he expected no major share price reaction.

TC shares were last up 0.5% at C$53.21 on the Toronto Stock Exchange.

The company reported comparable earnings of C$1.11 per share for the three months ended Dec. 31, while analysts had expected earnings of C$1.10 per share, according to Refinitiv data.

TC hiked its dividend to 93 Canadian cents per common share.

Earnings were boosted by global demand for oil and gas surging last year following Russia's invasion of Ukraine, as sanctions against Moscow left Europe scrambling to find alternate supplies and fortify its long-term energy security.

TC CEO Francois Poirier said the company is confident in its ability to achieve a planned C$5-billion asset divestiture program this year, and could "upsize" that program if valuations are attractive.

($1 = 1.3371 Canadian dollars)

(Reporting by Arshreet Singh; Editing by Sherry Jacob-Phillips, Devika Syamnath and Shounak Dasgupta)