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Enbridge (ENB) to Divest Natural Gas G&P Units, Raise $4.3B

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Enbridge Inc (ENB - Free Report) is expected to raise $4.31 billion from the divestiture of its Canadian natural gas gathering and processing (G&P) business to Brookfield Infrastructure Partners LP (BIP - Free Report) .

The assets include G&P units in the Montney, Peace River Arch, Horn River and Liard basins in British Columbia and Alberta. The G&P units have a total operating capacity of 3.3 billion cubic feet per day (Bcf/d) and 3,550 kilometer of natural gas gathering pipelines. It comprises 19 natural gas processing plants and liquids handling facilities.

Two separate agreements have been inked for the above-mentioned assets. Some of the facilities are managed by provincial regulations (Alberta and British Columbia) and others by federal National Energy Board regulations. The transaction related to the sale of provincially regulated facilities is expected to close in 2018. The deal concerning the sale of the federally regulated facilities is scheduled to close in mid-2019.

Enbridge will retain regulated natural gas transmission assets which include the Westcoast transmission system in British Columbia and the Alliance pipeline. These pipelines transfer natural gas from western Canada to the Chicago market.

In 2018, the company intends to divest assets worth $3 billion. Till date, Enbridge has divested assets worth about $7.5 billion. This indicates its ability to allocate capital efficiently and focus on raising shareholders’ value.

The proceeds from this transaction will help the company lower debt burden and gain financial flexibility which will drive growth. Enbridge’s estimate for DCF per share through 2020 remains unchanged, courtesy of the transaction.

On completion of the deal, Brookfield proposes to retain the Canadian G&P workforce.

Price Performance

In the past three months, Enbridge’s shares have gained 11.8% compared with the industry’s 5.3% rise.



 

Zacks Rank & Key Picks

Enbridge currently has a Zacks Rank #3 (Hold).

A few better-ranked players in the same sector are Occidental Petroleum Corporation (OXY - Free Report) and China Petroleum and Chemical Corporation , also known as Sinopec. These stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Occidental Petroleum is an international oil and gas exploration and production company. It pulled off an average positive earnings surprise of 30.2% in the last four quarters.

Sinopec is one of the largest petroleum and petrochemical companies in Asia. The company delivered an average positive earnings surprise of 492.8% in the last four quarters.

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