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Enbridge Buys Spectra, Strengthens Hold in North America

Zacks Equity Research

Enbridge Inc. ENB has become one of the largest energy companies in North America following its acquisition of Spectra Energy. Under the terms of the all-stock buyout, Enbridge gained 57% ownership of the merged entity while the remaining 43% is to be held by Spectra shareholders. The merger resulted in the conversion of each share of Spectra’s common stock into 0.984 of an Enbridge share.

The $126 billion merger brings together Enbridge’s liquid-weighted midstream assets from Western Canada and the U.S Midwest and Spectra's network of primarily gas-related midstream assets. The assets include Spectra’s holdings in the U.S. North, Midwest and Gulf Coast and the British Columbia’s Canadian province. We note that a total of 1,000 jobs were cut by the merged company.

The merged company has $74 billion in secure projects and inventory. By 2019, the company is expected to start up $26 billion worth projects. Enbridge believes that the company will yield a 3–5% compound annual growth rate with the inclusion of Spectra’s projects. The company is also expanding its platform for renewable power generation.

About The Company

Enbridge is a leader in energy transportation and distribution in North America and internationally. The company controls one of the longest crude oil and liquid hydrocarbons transportation system in the world. It is also increasing its involvement in the natural gas transmission and midstream businesses.  The company is headquartered in Calgary, Canada.

Price Performance

Enbridge shares have performed better than the Zacks categorized Oil and Gas - Production and Pipelines industry over the past month. During the aforementioned time period, Enbridge’s shares fell 0.53% compared with the industry’s decrease of 1.52%.

Zacks Rank and Stocks to Consider

Enbridge presently has a Zacks Rank #3 (Hold). Some better-ranked stocks in oil and energy sector include Cheniere Energy Partners, LP CQP, Alliance Holdings GP, L.P. AHGP and Ultrapar Participacoes S.A. UGP. Both Cheniere Energy and Alliance Holdings sport Zacks Rank #1 (Strong Buy), while Ultrapar has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Cheniere Energy is expected to witness sales growth of 130.19% year over year in 2017. The company had an average positive earnings surprise of 74.60% in the last four quarters.

Alliance Holdings is expected to see current quarter sales growth of 15.67% year over year. The partnership had an average positive earnings surprise of 5.50% in the last four quarters.

Ultrapar‘s year-over-year growth estimate for sales for the current quarter is 18.93%. The company posted a positive earnings surprise of 4.35% in the last quarter of 2016.

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