With oil expected to surge back into Enbridge Inc.’s Line 14 pipeline Tuesday, it’s not just good news for the Canadian oil patch, which suffers every time there’s an outage, but for investors, too.
The 318,000 barrel-a-day Line 14 was closed after it leaked 1,200 barrels in rural Wisconsin, the latest spill for a company seeking to persuade a raft of parties, from oil sands companies to British Columbia first nations, that it runs safe and reliable pipelines.
Not only was it a red-face moment for a company seeking reputational repair, but it was also troublesome for investors. “I estimate every 100,000 barrels per day of lost volumes per quarter impacts quarterly EPS by $0.02,” UBS analyst Chad Friess said in an e-mail.
That’s a substantial amount, given that Enbridge reported second-quarter earnings per share of a penny, after an accounting measure related to the value of some of its currency transaction stripped away most of its earnings.
And while Line 14 wasn’t out for long – meaning its impact stretched for far less than an entire quarter – it also isn’t coming back at full strength, meaning the per-barrel hit will continue into the future. U.S. regulatory authorities have ordered Enbridge to operate Line 14 at no more than 80 per cent of its normal pressure, providing a 63,600-barrel-a-day hit that will continue for an undetermined period of time – although the company will be able to alleviate some, or perhaps all, of that hit by diverting oil onto other pipes.