Enbridge Inc. announced better-than-expected recent results for your fourth quarter, but analysts fretted over project deferrals, after the company said a couple of its pipeline projects faced rising costs and delays of at least 2 yrs.
The Calgary-based pipeline operator posted net profit of $378 million in the fourth quarter on record volumes, amid a depressed crude oil price environment.
“Despite one of the most dramatic downturns in the energy sector in decades, we delivered very strong adjusted earnings and funds flow growth for our shareholders that were consistent with our expectations,” said Al Monaco, president and ceo.
Enbridge includes a $26 billion commercially secured capital program through 2019, of which $8 billion was funded and brought into service by the end of 2015. However, analysts are worried concerning the growing list of projects facing delays.
“We see the quarter as neutral for that stock weighing from the good results and reiteration of 2016 guidance against what we should see as continued market concerns about execution of the funding plan along with the deferral of growth,” Robert Kwan, analyst at RBC Capital Markets said inside a note to clients.
Two new Enbridge projects caught in the regulatory quagmire incorporate a proposed $2.6 billion Sand Piper project meant to transport oil from North Dakota to Minnesota, while a $7.5 billion Line 3 Replacement Project is planned to operate from Hardisty, Alta. to Wisconsin around the U.S. side, through Minnesota.
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The Minnesota Public Utilities Commission said recently it might need a final environmental impact statement before it may commence focus on the route permitting process. The Calgary-based pipeline operator expects the new regulatory requirements for projects to obstruct construction by two years to 2019 and deferment of $5 billion of capital.
Enbridge believes the new requirements are “unprecedented and contrary” to Minnesota law, and contains filed petitions to overturn the regulations.
The clients are also unlikely to start focus on the stalled $7.9 billion Northern Gateway anytime soon. In June 2014, the federal government approved the Alberta-to-West Coast conduit with 209 conditions, however the project faces local and aboriginal opposition. The nation’s Energy Board permit for that pipeline is set to run out if the company doesn’t start construction after 2016.
“Our ability to begin construction before the end of the year is really quite remote at this time,” Monaco said on an investor call, noting that the company will seek extra time towards the deadline.
Despite the challenge of building pipelines, Enbridge has been shipping additional Canadian barrels to United states refineries through its Line 9B reversal and Flanagan South and Seaway Twins expansions.
“We’re turning away barrels in the system,” Monaco said, noting that an additional 800,000 barrels per day of oil is expected to come on-stream till 2019.
“The upshot famous that is that people see ex-Alberta pipe capacity to be constrained for the following few years.”
However, the spate of cancelled projects within the oilsands has compelled the organization to broaden its horizon.
“It is difficult to determine how and where producers can make decisions going forward, and that’s why whenever we look at our strategy it falls back to setting up a listing of opportunities for Enbridge that are not dependent on the oilsands post 2019,” Guy Jarvis, head of liquid pipelines said.
Financial Post
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