Enbridge President and CEO Al Monaco speaks to reporters in Calgary, on May 7, 2014. THE CANADIAN PRESS/Mike RidewoodThe Canadian Press
Enbridge Inc. reported a fourth-quarter profit as Canada's largest pipeline operator was helped by increased demand to move oil on its Seaway and regional pipeline networks.
Net income was $88-million ($70-million U.S.), or 10 cents a share, compared with a loss of $271-million, or 33 cents, a year earlier, the Calgary-based company said in a statement on Marketwired Thursday. Excluding one-time items, per-share profit missed the 53-cent average of 13 analysts' estimates compiled by Bloomberg.
Enbridge is shipping rising volumes of Alberta's oil sands crude even as the price of the commodity has plunged. The pipeline operator plans to spend $44-billion through 2018 on projects, including new natural gas lines and power plants, to capture more of the market for growing energy demand. It has been transferring pipelines and renewable energy projects to affiliates to free up spending cash for expansions.
"While the vast majority of Enbridge's businesses have limited direct commodity price exposure, the recent drop in oil prices is impacting our customers," Chief Executive Officer Al Monaco said in the statement.
The company is considering transferring its U.S. liquids pipelines to Enbridge Energy Partners LP, a partnership it controls. It announced plans to move the majority of its Canadian liquids pipelines as well as renewable projects to Enbridge Income Fund last year.
Oil prices may be set to rise, further supporting the company's expansion plans. The Organization of Petroleum Exporting Countries has lowered its forecast for a supply increase from countries outside the group, and the International Energy Agency said a faster economic expansion will spur demand growth this year.
Planned Expansion
West Texas Intermediate, the U.S. benchmark crude, fell 42 per cent in the fourth quarter, averaging $73.20 a barrel.
Enbridge competitor TransCanada Corp. last week said fourth-quarter profit rose as the company benefited from deliveries on the southern leg of the Keystone XL pipeline.
Enbridge's planned expansions through 2018 carry less risk than some of its competitors, Paul Lechem, an analyst at CIBC World Markets in Toronto who has the equivalent of a buy rating on the stock, wrote in a Feb. 12 note to clients. The company is building out its existing network of pipelines, which attracts less regulatory oversight and public scrutiny, he said.
If commodity prices lead to less oil being produced and shipped, Enbridge's share price will suffer, Lechem said.
"Enbridge's Mainline volumes – and in a worst-case scenario of producer/shipper insolvency, potentially even some of its revenues on its contracted pipelines – could be at risk," he said.
The company is a 50-50 partner in the Seaway oil pipeline which runs between Cushing, Okla., and Freeport, Texas. The 500-mile (805 kilometre) pipeline was reversed in June 2012 to help refiners seeking more access to booming oil output from Canada and the mid-Continent.