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Texas-based Enbridge Energy Partners LP (EEP - Analyst Report) and its project partner Enbridge Income Fund have completed their Bakken crude pipeline expansion project, which forms a part of the partnership's Bakken Expansion Program.
The partnership reversed and extended an existing pipeline, beginning from Berthold, North Dakota, to Steelman, Saskatchewan. Enbridge also constructed a new 16-inch pipeline from a new terminal near Steelman to the Enbridge Pipelines Inc. mainline terminal near Cromer, Manitoba.
The Enbridge project has added a capacity of about 145,000 barrels per day (bpd) to the booming oil region around North Dakota, of which 25,000 bpd was brought online during the first quarter of 2012. The project began operations as scheduled and was within the budget.
Bakken production is likely to benefit from access to multiple markets, upon its linking with the Enbridge mainline and its connected pipeline systems. The project has already received firm commitments of 100,000 bpd from anchor shippers.
Over the last five years, yield from the expansive Bakken formation has increased considerably to more than 700,000 bpd from 200,000 bpd. The production is expected to touch 1,200,000 bpd in the next six years.
The latest project represents the third expansion undertaken by the partnership to meet the needs of Saskatchewan producers and facilitate rising production from the Bakken region to access the main U.S. markets.
The project is mainly underwritten by take-or-pay contracts and signifies an additional source of attractive and stable distributable cash flow for the Fund. Enbridge Inc. (ENB - Snapshot Report) operates the Canadian pipeline and holds a 23% stake in Enbridge Energy Partners and a 20% stake in the Enbridge Income Fund.
Enbridge carries a Zacks Rank #3, which is equivalent to a short-term Hold rating. However, there are other stocks in the oil and gas sector – Enerplus Corporation (ERF - Snapshot Report) and Range Resources Corporation (RRC - Analyst Report) – which hold a Zacks Rank #1 (Strong Buy) and are expected to perform better.
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