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Enbridge (ENB) Reduces Mainline Rates, Sparks Price War

Enbridge Inc. (ENB) drastically reduced the rates it charges producers to ship crude on its Mainline system, sparking a pricing war on pipelines in Canada, per media reports.

According to a regulatory filing from ENB, the cost of transporting heavy crude from the Hardisty, Alberta, oil hub to terminals in Flanagan, IL, would decrease 12% to $28.80/cm on Jul 1.

Per media reports, Enbridge has admitted that although the project will take some revenues away from its Mainline system, it will almost triple the line's capacity and connect Alberta's oil sands to markets in Asia.

The Trans Mountain conduit’s route from Alberta to the Pacific Coast near Vancouver provides producers with the opportunity to diversify their sales away from U.S. refiners. The majority of the conduit’s increased daily capacity of 590,000 barrels will be reserved under long-term contracts. The 3-million-barrel-a-day Mainline, which connects to the Gulf Coast refineries that currently receive the majority of Canada's crude, doesn't offer long-term contracts.

However, the Trans Mountain expansion project is running behind schedule and has been affected by rapidly growing costs. Some of that increase will probably be passed on to shippers through additional tolls that have not been announced yet.

Zacks Rank & Key Picks

Currently, Enbridge carries a Zack Rank #3 (Hold).

Some better-ranked stocks for investors interested in the energy sector are Sunoco LP SUN, Murphy USA Inc. MUSA and RGC Resources Inc. RGCO. While Sunoco sports a Zacks Rank #1 (Strong Buy), both RGC Resources and Murphy USA carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Sunoco, a distributor of motor fuel to approximately 10,000 convenience stores, has a stable business model with sustainable and predictable cash flows. For this year, SUN has witnessed an upward earnings estimate revision in the past 30 days.

Murphy USA, a leading retailer of gasoline, operates stations close to Walmart supercenters and sells low-cost, high-volume fuel. MUSA, with more than 1,700 stores, has witnessed an upward earnings estimate revision for 2023 and 2024, in the past 30 days.

RGC Resources is a holding company that offers energy and associated products and services through its operational subsidiaries —Roanoke Gas Company and RGC Midstream, LLC. RGCO has thousands of customers through its natural gas distribution companies that serve the Roanoke Valley and Bluefield, Virginia and West Virginia areas. For this year, the company has witnessed an upward earnings estimate revision in the past 30 days.

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