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Here's Why Hold Strategy is Apt for Enbridge (ENB) Stock Now
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Enbridge Inc. (ENB - Free Report) is likely to see earnings growth of roughly 5% in 2022 and 2023 each. In the past seven days, there have been no earnings estimate revisions for the current year and the next year.
Factors Favoring the Stock
Currently carrying a Zacks Rank #3 (Hold), Enbridge has an extensive network of pipeline assets responsible for transporting roughly 30% of North American crude oil production. The midstream properties are also responsible for carrying as much as 20% of the natural gas Americans consume. Through its Gas Distribution and Storage operations, Enbridge has delivered roughly 2 trillion cubic feet of natural gas, thereby serving 75% of Ontarians.
With a significant portion of its assets being contracted by shippers for the long term, its business model is less exposed to volatility in oil and gas prices. Underpinned by long-term contracts, Enbridge’s business model also has considerably lower volume risk exposure.
Enbridge has estimated roughly C$10-billion secured growth capital projects, of which C$4 billion will likely be in service this year. Thus, Enbridge is securing more cashflows in the coming years.
Risks
Compared to composite stocks belonging to the industry, Enbridge’s balance sheet has more debt exposure.
Line 5 is a critical infrastructure responsible for supplying 55% of the propane demand in Michigan. A few years back, the company entered into agreements with the state to construct a tunnel that would encase a replacement section of the Line 5 oil pipeline to enhance safety. However, repeated protests for shutting down the line on safety concerns could affect Enbridge.
Chesapeake Energy is a premium natural gas operator and is well-positioned to gain from the significant improvement in gas price in the past year. In the prolific gas-rich Marcellus shale play, CHK’s operation is spreading across roughly 650,000 net acres, where an average of four to five rigs will be operating this year. Chesapeake Energy also has a strong presence in Haynesville and Eagle Ford shale play, making the production outlook bright. Overall, being a leading upstream energy player, CHK has a more than 15 years of inventory, signifying more than 2,200 gas locations.
Enterprise Products generates stable fee-based revenues from its extensive pipeline network across more than 50,000 miles, transporting natural gas, natural gas liquids (NGLs), crude oil petrochemicals and refined products.
The midstream infrastructure provider also has storage assets that can hold more than 260 million barrels of NGL, petrochemical, refined products and crude oil. These assets can also store 14 billion cubic feet of natural gas. Moreover, Enterprise Products has $5.5 billion of major capital projects under construction that are likely to provide incremental fee-based revenues.
The positive trajectory in oil price is a boon for ExxonMobil’s upstream operations. This is because ExxonMobil has a pipeline of key projects in the Permian – the most prolific basin in the United States – and offshore Guyana.
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Here's Why Hold Strategy is Apt for Enbridge (ENB) Stock Now
Enbridge Inc. (ENB - Free Report) is likely to see earnings growth of roughly 5% in 2022 and 2023 each. In the past seven days, there have been no earnings estimate revisions for the current year and the next year.
Factors Favoring the Stock
Currently carrying a Zacks Rank #3 (Hold), Enbridge has an extensive network of pipeline assets responsible for transporting roughly 30% of North American crude oil production. The midstream properties are also responsible for carrying as much as 20% of the natural gas Americans consume. Through its Gas Distribution and Storage operations, Enbridge has delivered roughly 2 trillion cubic feet of natural gas, thereby serving 75% of Ontarians.
With a significant portion of its assets being contracted by shippers for the long term, its business model is less exposed to volatility in oil and gas prices. Underpinned by long-term contracts, Enbridge’s business model also has considerably lower volume risk exposure.
Enbridge has estimated roughly C$10-billion secured growth capital projects, of which C$4 billion will likely be in service this year. Thus, Enbridge is securing more cashflows in the coming years.
Risks
Compared to composite stocks belonging to the industry, Enbridge’s balance sheet has more debt exposure.
Line 5 is a critical infrastructure responsible for supplying 55% of the propane demand in Michigan. A few years back, the company entered into agreements with the state to construct a tunnel that would encase a replacement section of the Line 5 oil pipeline to enhance safety. However, repeated protests for shutting down the line on safety concerns could affect Enbridge.
Stocks to Consider
A few better-ranked stocks in the energy space are Chesapeake Energy Corporation (CHK - Free Report) , Enterprise Products Partners LP (EPD - Free Report) and Exxon Mobil Corporation (XOM - Free Report) . While Chesapeake Energy sports a Zacks Rank #1 (Strong Buy), Enterprise Products and ExxonMobil carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Chesapeake Energy is a premium natural gas operator and is well-positioned to gain from the significant improvement in gas price in the past year. In the prolific gas-rich Marcellus shale play, CHK’s operation is spreading across roughly 650,000 net acres, where an average of four to five rigs will be operating this year. Chesapeake Energy also has a strong presence in Haynesville and Eagle Ford shale play, making the production outlook bright. Overall, being a leading upstream energy player, CHK has a more than 15 years of inventory, signifying more than 2,200 gas locations.
Enterprise Products generates stable fee-based revenues from its extensive pipeline network across more than 50,000 miles, transporting natural gas, natural gas liquids (NGLs), crude oil petrochemicals and refined products.
The midstream infrastructure provider also has storage assets that can hold more than 260 million barrels of NGL, petrochemical, refined products and crude oil. These assets can also store 14 billion cubic feet of natural gas. Moreover, Enterprise Products has $5.5 billion of major capital projects under construction that are likely to provide incremental fee-based revenues.
The positive trajectory in oil price is a boon for ExxonMobil’s upstream operations. This is because ExxonMobil has a pipeline of key projects in the Permian – the most prolific basin in the United States – and offshore Guyana.