Enbridge Inc. (ENB) announced that it has entered into an agreement to construct facilities and provide transportation services for the Hangingstone Oil Sands Project in Canada. The initial term of the transportation agreement is 20 years. Oil sands extraction company, Japan Canada Oil Sands Limited (:JACOS) is the operator of the Hangingstone Oil Sands Project. However, the project is jointly owned by JACOS and Chinese offshore giant CNOOC Ltd (CEO).
Per the agreement, Enbridge will construct a 50-km pipeline with a capacity to transport 40,000 barrels per day (bpd) of diluted bitumen produced at the Hangingstone Project to the Enbridge terminal in Cheecham, Alberta. The project is expected to be operational in early 2016, with initial volumes of 18,000 bpd. However regulatory approval for the project is pending.
Canada-based Enbridge Inc. is a leading energy transportation and distribution company. As a transporter of energy, Enbridge operates the world's longest crude oil and liquids pipeline system in Canada and the United States. The company is also involved in natural gas transmission and midstream businesses in other countries. As a distributor of energy, Enbridge owns and operates Canada's largest natural gas distribution company. It provides distribution services in Ontario, Quebec, New Brunswick and New York State.
We remain apprehensive about the company’s midstream natural gas business, which is sensitive to changes in natural gas supply-demand fundamentals and commodity cycles associated with gas processing margins.
Enbridge carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next 1 to 3 months.
Meanwhile, one can look at Oiltanking Partners LP (OILT) and Pembina Pipeline Corporation (PBA) as good buying options. These oil production and pipeline operators – sporting a Zacks Rank #1 (Strong Buy) – have solid secular growth stories and the potential to rise significantly from the current levels.