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Enbridge Q3 Earnings Lag, Revs Rise

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Enbridge Energy Partners L.P. (EEP - Free Report) reported third-quarter 2013 adjusted earnings of 9 cents per unit, lagging the Zacks Consensus Estimate of 26 cents. The quarterly figure was also lower than the year-earlier profit of 29 cents.

The quarter’s total revenue increased 14.4% year over year to $1,789.4 million from the year-ago level of $1,564.3 million. The reported figure also beat the Zacks Consensus Estimate of $1,716.0 million.


Enbridge declared quarterly cash distribution rate of 54.35 cents per unit ($2.17 per unit annualized), level with the preceding quarter.

Operational Performance

Operating income in the Liquids segment declined 2.1% to $150.2 million in the quarter from the year-earlier level of $153.5 million. The segment witnessed higher operating and administrative expenses related to scheduled pipeline integrity initiatives. This was partially offset by higher indexed transportation rates, in addition to contributions from growth projects entering into service earlier in the year.

The partnership’s volumes in the Liquids system increased 3.3% year over year to 2,247 thousand barrels per day in the reported quarter.

Operating income of the Natural Gas segment decreased 71.3% year over year to $17.3 million. The decrease was primarily due to lower NGL prices, in addition to lower NGL and natural gas volumes in the systems.

During the quarter, Natural Gas throughput dropped to 2,391,000 million British thermal units per day (MMBtu/d) from the year-earlier level of 2,627,000 MMBtu/d.

The Marketing segment registered operating loss of $0.5 million versus an operating loss of $1.2 million in the prior-year quarter. The improvement was primarily attributable to the expiration of certain firm natural gas transportation demand fees on third party pipelines and additional optimization opportunities from modestly improved natural gas basis spreads.


Enbridge Energy remains optimistic about its long-term growth. It expects various organic projects to be commissioned in 2013 and 2014. These projects are characterized by their longer term and lower risk. The partnership’s business model will assist the initiative of its parent company – Enbridge Inc. (ENB - Free Report) – in increasing capacity in the Lakehead System and the Eastern Access Projects with its commissioning scheduled for 2014. The partnership is undertaking various growth initiatives in the Liquids segment as witnessed by pipeline expansion for expediting the movement of resources from the Bakken region.

However, we remain apprehensive about its midstream natural gas business, which is sensitive to changes in natural gas supply, demand fundamentals and commodity cycles associated with gas processing margins.

Enbridge Energy carries a Zacks Rank #4 (Sell). However, there are other stocks in the oil and gas sector – TransAtlantic Petroleum Ltd and Northern Oil and Gas, Inc. (NOG - Free Report) – which hold a Zacks Rank #1 (Strong Buy) and are expected to perform better.

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