By David Hendricks
San Antonio Express-News
SAN ANTONIO — Increased rail shipments of oil from the Eagle Ford Shale drilling and more Mexican auto exports are driving job growth and capital spending for Union Pacific Corp. in South Texas, the company’s chief financial officer said Wednesday in San Antonio.
U.P. spent $130 million last year on capital improvements in the region, CFO Robert Knight said during a presentation at Port San Antonio.
The railroad company also hired as many as 300 people last year in the San Antonio service area, which stretches from Katy to Alpine east to west and Hearne to Laredo north to south, said Mike Brazytis, U.P.’s San Antonio service unit superintendent.
The company will hire another 200 to 300 in 2013, Brazytis predicted.
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The San Antonio service area has nearly 1,100 U.P. customers, accounting for $2.1 billion in annual revenues, or about 10 percent of U.P.’s activity.
“That’s big,” said Knight, addressing port officials and invited guests, including Texas Secretary of State John Steen Jr., Bexar County Judge Nelson Wolff and law firm advisor Jose Villarreal, a U.P. board member.
U.P. is busy bringing sand to South Texas from states like the Dakotas and Minnesota for hydraulic fracturing — a drilling process that uses that uses sand, water and chemicals — and shipping oil to refineries, Knight said.
Serving Gulf of Mexico coast refineries is one of U.P.’s largest activities — one that will continue to grow as refineries plan expansions totaling $15 billion in investments, Knight said.
More Eagle Ford Shale oil will be going to seven refineries on the West Coast, too. Knight could not project a specific increase in oil- and drilling-related shipments. “We can’t nail it down. It’s growing so significantly,” he said.
U.P.’s oil tanker shipments from the Bakken Shale area in Montana and North Dakota to Louisiana refineries are an even bigger business for the railroad company than the Eagle Ford, he added.
U.P., the nation’s largest railroad company by geography, also is shipping more autos from Mexico to the U.S. market. Mexico is exporting about 2.7 million vehicles a year, Knight said, and the number will rise by another 1 million annually in a few years.
“You cannot name an automaker who is not investing heavily in Mexico,” Knight said.
About 857,000 U.P. rail cars crossed the U.S.-Mexico border last year, up from 600,000 in 2009.
But despite the increases in auto- and energy-related shipments, Knight said U.P.’s freight volume system-wide is down 2 percent year to date. Coal shipments to utilities have fallen dramatically because of the low cost of plentiful natural-gas supplies. Agricultural shipments also are lower because of widespread drought, he said.
U.P. will spend $3.6 billion on capital improvements overall this year, almost equaling the $3.7 billion spent last year, he said. Capital spending is running at a high level because of improved earnings performances the last few years, he explained.
U.P.’s return on investment rose to 14 percent in 2012, up from 5.3 percent in 2004. U.P. paid $2.49 per share in dividends to shareholders in 2012, up from about 75 cents in 2007.
U.P. is watching Mexico’s new government to see if its energy monopoly, Petróleos Mexicanos, will move to explore and develop the continuation of the Eagle Ford Shale formation into North Mexico.
San Antonio Hispanic Chamber of Commerce President and CEO Ramiro Cavazos told the group that Mexico’s portion of the shale formation is about equal in size to the Texas portion. “It would be a whole other opportunity,” Cavazos said.
Mexico is about five years behind the United States in developing a shale energy, Knight added.
“It would be a large growth area that will affect this (South Texas),” he said.