The railway company (TSX:CNR) said revenue from transporting crude oil increased by 150 per cent during the second quarter from a year ago, driven mostly by new loading stations on its network.
"There is still a likelihood that crude by rail will continue to rise in volume," chief marketing officer Jean-Jacques Ruest said during a conference call Monday to discuss the railway's second-quarter results.
CN reported profits and revenue that were up from a year ago, helped by rate increases, higher volumes and the positive impact of the weaker Canadian dollar on U.S.-dollar denominated revenues.
The railway said it earned $717 million or $1.69 per diluted share for the quarter ended June 30, up from $631 million or $1.44 per diluted share a year ago. Revenue totalled $2.67 billion, up from $2.54 billion.
Excluding one-time items, the company says it earned $1.66 per share, up from $1.50 per share a year ago.
The average analyst estimate compiled by Thomson Reuters had called for a profit of $1.62 per share and revenue of $2.7 billion.
The wisdom of shipping oil by rail has come under scrutiny after a runaway train belonging to the Montreal, Maine & Atlantic carrying 72 cars of oil derailed and exploded in Lac-Megantic, Que., killing 47 people earlier this month.
Using railways to carry oil has been a growing part of CN's business as oil producers faced with limited pipeline capacity look for other ways to get their product to market.
CN Rail and Canadian Pacific Railway (TSX:CP) both launched reviews their safety procedures in the wake of the Quebec disaster.
"We are analyzing every aspect of what could have gone wrong on the MMA to cause a runaway train situation, and we are also assessing all of our train securement policies," CN chief executive Claude Mongeau said.
"The bottom line is that we feel our train securement policies are robust, but we are nevertheless reviewing them in light of the accident."
In its latest quarter, the railway said revenues from carrying petroleum and chemicals were up 18 per cent, while grain and fertilizer revenue was up five per cent. Metals and minerals gained four per cent, as did forest products, while intermodal revenue was up three per cent.
Coal revenues were flat and automotive revenues declined by three per cent.
However, Mongeau cautioned that a slowdown in grain and fertilizer exports during the summer months could make for a challenging second half of the year.
"We're pursuing growth opportunities on all fronts and we are also tightly managing our costs," he said.
"Clearly there's a soft patch in terms of demand here, particularly in the third quarter, and we hope the economy will continue to help us in the fourth quarter."
CN said carloads increased by two per cent while revenue ton-miles, which measures the relative weight and distance of rail freight transported, increased five per cent over a year ago.
Operating expenses increased four per cent due to services, fuel costs and higher depreciation and amortization.