Enbridge eyes booming U.S. LNG market with pipeline acquisition; profit falls short of estimates

Enbridge Inc, Canada’s largest pipeline operator, posted quarterly profit below analysts’ estimates on Friday, as higher operating costs ate into the company’s earnings.

The company transported 2.728 million barrels per day (bpd) of crude oil on its Mainline system during fourth quarter ended Dec. 31, up from 2.685 million bpd a year earlier. However, adjusted core earnings from its Mainline system fell 3.7 per cent.

Adjusted earnings before income tax, depreciation and amortization (EBITDA) in its gas transmission and midstream unit decreased $4 million, partly hurt by lower gas prices and higher operating costs linked with the Texas Eastern natural gas pipeline blast in Kentucky in August.

The blast near Danville, Kentucky on the Texas Eastern system followed an explosion in Ohio in January last year, that injured at least two people.

The company reported a 5.3 per cent rise in adjusted earnings to $1.23 billion.

On a per share basis, the company earned 61 cents, below analysts’ expectations of 63 cents, according to IBES data from Refinitiv.

Enbridge also said it will acquire Rio Bravo Pipeline Company, LLC from Houston-based NextDecade for a cash purchase price not exceeding $25 million, with $15 million paid at closing and the balance paid upon NextDecade’s reaching a positive final investment decision on its Rio Grande LNG export facility in the Port of Brownsville, Texas.

Enbridge will own one hundred percent of RBPL and develop, finance, constructe, and operate the Rio Bravo Pipeline. NextDecade will continue to be responsible for the development, financing, construction, and operations of its Rio Grande LNG export facility.

Enbridge and Next Decade will also ensure a steady supply of gas to the LNG export facility for 20 years, if the initial conditions are met.

Enbridge‘s commitment to the development of the Rio Bravo Pipeline in support of NextDecade’s Rio Grande LNG project further strengthens our ability to serve the expanding LNG export market and fits squarely within our low-risk business model,” said Bill Yardley, Enbridge‘s executive vice president and president of gas transmission and midstream.

The Rio Bravo Pipeline will transport up to 4.5 billion cubic feet per day of natural gas from the Agua Dulce supply area to NextDecade’s Rio Grande LNG project in Brownsville, Texas.

© Thomson Reuters 2020 With files from Financial Post Staff

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