How to Play the Obama Pipeline Rejection

President Obama denied a permit that TransCanada (TRP) needed to build the Keystone XL Pipeline, which would stretch from Canada’s tar sands in Alberta to Gulf of Mexico refineries.

Keybanc Capital Markets analyst Tahira Afzal expects that the pipeline will eventually get passed as TransCanada expects to resubmit its application. Afzal thinks that investors should consider some of the contractors that were expected to build the pipeline, as well as other contractors in the space that could benefit from tighter demand for the kinds of services they provide.

“We would see incremental movement on a resubmitted pipeline as potential upside in 2013 and afterwards for Quanta Services (PWR), which along with private contractors Sheehan and Michels, was selected by TransCanada in November 2010 to build the northern portion of the pipeline (from Alberta, Canada to Steele City, Nebraska). We believe MasTec (MTZ), Willibros Group (WG), Primoris Services (PRIM) and PWR would also benefit from tighter contractor capacity in the space, as Keystone XL, if approved in its entirety, is estimated to take up approximately 18 spreads of contractor capacity.”