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Enbridge on Track with Nexus Pipeline After FERC Approval

Zacks Equity Research

Canadian energy distributor Enbridge Inc. ENB is planning to finish its Ohio to Ontario Nexus natural gas pipeline in the third quarter of 2018. To build the pipeline, the company has partnered with Detroit-based electric utility DTE Energy Company DTE.

The project's construction received approval from the Federal Energy Regulatory Commission (FERC) a few days back. The regulatory approval will ensure that the project stays on track. In July 2017, the partnership estimated that it would take seven to 10 months to build the pipeline after receiving FERC approval for the project.

About the Pipeline

The $2 billion Nexus natural gas pipeline will be 255 miles long, of which 47 miles will be in Michigan and 208 miles in Ohio. It will have a transportation capacity of 1.5 billion cubic feet of gas per day. The pipeline will carry natural gas from West Virginia and the Marcellus and Utica shale in Ohio, Pennsylvania to Eastern Canada and the Midwest of the United States.

The pipeline will meet growing natural gas demand in Ohio, Michigan, Chicago and Ontario, Canada. The pipeline will carry Appalachian shale gas to high-demand markets, which will be used for cleaner power generation, industrial and commercial use. Household usage also creates a huge demand for the natural gas in the region. Moreover, the company expects the project to create 6,800 jobs.

About Enbridge

Headquartered in Calgary, Alberta, Enbridge is a leading energy infrastructure company. One of its businesses is the transportation of energy through the most extensive and advanced crude and liquids pipeline system that is spread across 17,511 miles globally. Through the Mainline and Express pipelines, the company transports 2.8 million barrels of crude every day, which accounts for almost 68% of the Canadian crude oil production that is transported to the United States.

In Canada, the company is touted to be the largest natural gas distributer. Hence, it is quite obvious that a significant portion of the company’s earnings is generated from transportation operations, driven by a string of long-term contracts. The substantial contract base will likely provide the company with stable cash flow in the coming years.

However, the persistently weak oil and natural gas prices have resulted in lower production in 2016 compared with the massive volumes of 2015. This could lead to decreased demand for new midstream infrastructure assets like oil and gas pipeline facilities, which might hurt cash generation for Enbridge.

Price Performance

Enbridge has lost 1.5% of its value year to date against 2.9% growth of its industry.

Zacks Rank and Stocks to Consider

Enbridge currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the oil and energy sector are Enbridge Energy, L.P. EEP and Par Pacific Holdings, Inc. PARR. Both sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Enbridge Energy’s earnings for 2017 are expected to surge 24.2% year over year. The partnership delivered a positive earnings surprise of 7.7% in the second quarter of 2017.

Par Pacific’s sales for the third quarter of 2017 are expected to increase 28.5% year over year. The company delivered a positive average earnings surprise of 9.1% in the last four quarters.

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DTE Energy Company (DTE) : Free Stock Analysis Report
 
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