Alberta Wildfires Put a Barely Noticable Dent in Enbridge Energy Partners' Earnings

By Markets Fool.com

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Considering the impact that devastating wildfires in the heart of Alberta's oil sands region had on production, it wouldn't have been surprising if Enbridge Energy Partners' (NYSE: EEP) took a big hit. Surprisingly, though, the company's earnings barely skipped a beat. New revenue sources from last quarter and no odd ball charges to the balance sheet helped to increase operational profits and distributable cash flow. Here's a quick look at Enbridge Energy Partners results from the second quarter and where the company plans to go from here.

Enbridge Energy Partners earnings: The raw numbers

Results (in millions, except per share data) Q2 2016 Q1 2016 Q2 2015
Revenue $1,048 $1,061 $1,313
Adjusted EBITDA $489.3 $466.3 $422.4
Net income per share attributable to Enbridge Energy Partners $0.08 $0.17 ($0.44)
Distributable cash flow $262.7 $244 $231.6

Source: Enbridge Energy Partners earnings release

The two more important numbers to look at here are adjusted EBITDA and distributable cash flow. Revenues can vary a lot with commodity prices, but cost of goods sold typically track revenue changes. Also, net income can be affected by several non-cash charges that may not reflect the underlying profitability of the company. So adjusted EBITDA is a better apples-to-apples comparison of the company's quarterly result. Also, since the company pays its unitholders with distributable cash flow, that is the bottom line worth tracking.

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One thing that is a little surprising about these results is that they don't show much ill effect from the recent wildfires in Alberta. For several weeks during the quarter, operations were shut down around the Fort McMurray region, which just happens to be at the center of many oil sands operations and home to most of the employees of these operations.

What happened with Enbridge Energy Partners this quarter?

  • Liquids volumes in Enbridge's system were down compared to last quarters record 3.3 million barrels per day, but were still a respectable 3.0 million bpd thanks to expansions of the company's Mainline system. Much of the volume decreases for the quarter came in the company's Lakehead system that were adversely impacted by the Alberta wildfires.
  • The company has itsMidcoast Energy Partners(NYSE: MEP) investment under review and expects to have a plan together by the end of the year.
  • Volumes in Enbridge Energy Partners' natural gas lines were down 13% compared to this time last year as low gas prices have curtailed drilling activity in North and East Texas as well as the Anadarko Basin where the company's natural gas gathering systems are located.
  • The company completed the final phase of its Eastern Access Program as its Line 6B expansion was put online. The expansion will add 70,000 barrels per day.
  • Enbridge (NYSE: ENB) came to an agreement with the US Department of Justice and the Environmental Protection agency related to its Line 6B spill back in 2010. The agreement says that Enbridge has fulfilled all of its obligations and civil penalties related to the spill.
  • The company declared a distribution to shareholders of $0.583 per unit, the same as the prior quarter.

What management had to say

Enbridge President Mark Maki took a few moments to address that while the wildfires did have an impact on the company's results, the company has responded quickly and doesn't expect it to impact results too much in the upcoming quarters. He also wanted to give investors a timeline on its decision related to Midcoast Energy Partners.

Extreme wildfires impacted the producing regions of northernAlbertain May and June, and we are proud of how our team responded to ensure the safety of our people and the integrity of our liquids pipeline systems. We worked diligently with our customers to bring affected volumes back online as quickly and safely as possible. Demand for our liquids pipeline systems remains strong, and we expect Lakehead system deliveries during the third quarter to return to levels anticipated at the outset of the year.

The Partnership continues to successfully execute its organic growth program, bringing needed additional capacity and connectivity to our liquids pipeline systems. Expansions to our system further enhance our unmatched market access, which is critical to our customers. Increasing our customers' access to premium markets gives us confidence in the continued high system utilization of our liquids pipelines business. Additionally, we are progressing on our strategic evaluation of the Partnership's investments in the natural gas business throughMidcoast Operating, L.P.andMidcoast Energy Partners, L.P., and we expect to complete the evaluation by the end of this year.

Looking forward

Enbridge Energy Partners has a very profitable liquids pipeline system that provides essential market access for Canadian crude, but its investments in natural gas gathering pipelines have not panned out as expected. A strategic evaluation probably means that it will sell its interest in Midcoast Energy Partners, and don't be surprised if it decides to lump its own natural gas assets in with any decision related to Midcoast.

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Tyler Crowe has no position in any stocks mentioned. You can follow him at Fool.comor on Twitter@TylerCroweFool.

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