Tags: Enbridge | top | pipeline | EEP

Enbridge Reaps Rewards of Top Pipeline

By    |   Thursday, 09 February 2012 10:46 AM

Enbridge Energy Partners (EEP), one of the biggest transporters of crude oil in the Americas, reaps the rewards of using a top pipeline asset.

The master limited partnership operates the U.S. section of the world’s longest crude pipeline, Lakehead. It runs 3,300 miles from the oil fields in Alberta, Canada to the Midwest, including Chicago. The pipeline is being extended toward the Gulf Coast.

Lakehead carries about two-thirds of Canadian crude exports to the United States and about 10 percent of all U.S. crude imports, according to Morningstar. So Enbridge has one of the best pipelines in the business.

Booming production of crude and natural gas in Canada, the Bakken region, the DJ Basin, and elsewhere translates into more product coursing through Enbridge pipelines. The surge in production of unconventional liquid natural gas is a big catalyst for the company’s growth.

Enbridge also has strong potential in North Dakota, where crude production in the Bakken area could double to more than 1 million barrels per day over the next five years, according to Morningstar. Crude oil storage represents another possible growth area for Enbridge.

Hefty return

Enbridge shares have produced an annualized total return of 34.4 percent over the past three years, 37 basis points ahead of Morningstar’s oil and gas midstream index.

Standard & Poor’s analyst Tanjila Shafi has a hold rating on Enbridge shares. “We are encouraged by EEP's expansion program,” she writes.

“We see its Bakken expansion program, which aims to increase crude oil pipeline capacity to 325,000 barrels per day by the first quarter of 2013, benefiting from growing crude oil production at the Bakken Shale.”

In the third quarter, Enbridge scored a profit of $122.6 million, reversing a $406.4 million loss from a year earlier. Revenue soared 26 percent to $2.4 billion.

The company has delayed reporting its fourth-quarter earnings and hasn’t released a new date.

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