Burlington Northern Santa Fe Navigates Coal Slump With Large Oil Gain

Burlington Northern Santa Fe (the railroad owned by Warren Buffett,) as well as the Union Pacific, have successfully gotten past the drop in their losses in coal cargo by responsibly catering to the same industry. They are now shipping shale and crude oil to take coal’s place.

Union Pacific, Burlington Northern Santa Fe and other railroad companies are hauling around the gear of these energy producers which will allow them to extract their crude oil and natural gas from the shale, then when the time is right they are also shipping out these petroleum products for their customers. The petroleum carloads of Burlington Northern Santa Fe rose by a total of 75% during the second quarter, when compared to the same time last year. Union Pacific, on the other hand also saw a 12% gain in this area where it groups fracking – related freight.

“This is a whole industry that just sprung up on all the rail properties,” Jeffrey Kauffman, an analyst at Sterne Agee & Leach, said. “It’s a new growth source.”

This transition has come at quite a big cost, since many of the North American utilities stopped creating their power by using coal since they have switched over to natural gas which is a lot cheaper. The coal cargoes at the class I railroads, which are the largest in North America, dropped roughly 11% during the second-quarter. Union Pacific’s chemicals segment, and Burlington Northern Santa Fe’s petroleum shipments do not even come close to the coal volumes in which they move.

“The shale opportunity has been a double-edged sword for the rails,” Ben Hartford, a Robert W. Baird & Co. analyst in Milwaukee, said. “The abundance of natural gas domestically has pressured prices, and the resulting degradation to the coal demand has been palpable.”

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