(Source: MARKETWIRE)
Enbridge Inc. (TSX: ENB) (NYSE: ENB) "Through the second quarter of 2009, Enbridge continued to deliver favourable operating performance across our liquids and natural gas businesses, highlighted by significant progress on our projects under construction, and the announcement of a major new oil sands project," said Patrick D. Daniel, President and Chief Executive Officer. "With adjusted earnings per share of $1.28 for the first six months of the year, we are ahead of where we had expected to be. We are now on track to achieve the upper half of our $2.18 to $2.32 per share full year adjusted earnings guidance range, for an annual growth rate greater than 20%.
"Looking further out, and affirmed through our annual review and update of our strategic plan, we expect to sustain a 10% plus average annual earnings per share growth rate from 2008 through 2013," continued Mr. Daniel.
In June 2009, Enbridge announced an agreement with Imperial Oil Resources Ventures Limited and ExxonMobil Canada Properties to provide for the transportation of blended bitumen from the Kearl project in the Athabasca Oil Sands region of northern Alberta to the Edmonton, Alberta area. The first phase of the new pipeline system is a 140-kilometre pipeline from Kearl Lake to Enbridge's Cheecham Terminal.
Today in a separate news release, Enbridge announced it has entered into Letters of Intent (LOI) with Chevron Corp. for an extension of its central Gulf of Mexico offshore pipeline system. Under the terms of the LOI, Enbridge proposes to construct, own and operate the Walker Ridge Gathering System (WRGS) to provide natural gas gathering services to the potential Jack, St. Malo and Big Foot ultra deepwater developments.
Noted Mr. Daniel, "The Walker Ridge Gathering System will enhance Enbridge's existing offshore pipeline business and establish a strategic base for future growth opportunities in the ultra-deep Gulf of Mexico. Securing this new offshore pipeline project investment opportunity as well as the pipeline transportation services for the Kearl oil sands project, combined with a variety of other prospective opportunities under development on the liquids pipelines, gas and clean energy sides of our business, positions Enbridge well to extend a 10% average growth rate well beyond 2013."
Forward Looking Information
This news release contains forward looking information. Significant related assumptions and risk factors are described under the Forward Looking Information section of this news release.
On July 20, 2009, Enbridge and its affiliate, Enbridge Energy Partners (EEP), announced a joint funding agreement for the United States segment of the Alberta Clipper mainline expansion project. Enbridge will fund two-thirds of the project.
"The joint funding of Alberta Clipper U.S. enables the project to be accretive to both Enbridge and EEP, and is reflected in our expected 10% plus medium-term average growth rate," said Mr. Daniel. "Enbridge has ample capacity to fund this commitment to EEP, with approximately $1.5 billion of surplus equity remaining available for additional opportunities."
Enbridge's initiatives in carbon transportation and sequestration took a significant step forward at the end of June 2009 with the announcement that the Genesee power generation facility project, proposed jointly with Epcor and the Alberta Saline Aquifer Project (ASAP), has been selected to enter into negotiations with the Government of Alberta for funding through the province's $2 billion program for large-scale carbon capture and storage (CCS) projects. The Genesee project also received funding from the federal government's ecoEnergy Technology Initiative in March 2009.
"CCS has the potential to transform the environmental footprint of our energy economy, and may be one of the best ways for Canada to reduce our greenhouse gas emissions," said Mr. Daniel. "Through our participation in the Genesee project, we'll have the opportunity to thoroughly test the technology for safety and effectiveness, and to share it with others in our industry."
"Despite a continuing tough global economic climate, Enbridge remains very well positioned to deliver superior value to our shareholders through our focus on sustained visible growth, a low risk business model and steady distributions of income," concluded Mr. Daniel.
At its July 28, 2009 meeting, the Board of Directors of Enbridge announced the appointment of Charlie W. Fischer, former President and Chief Executive Officer of Nexen Inc., to the Board.
"We are delighted to welcome an individual of Charlie Fischer's reputation and expertise to Enbridge's Board," said Mr. Daniel. "With over 30 years experience in the energy industry and a strong personal commitment to community involvement, Mr. Fischer is a great leader and one who will make a significant contribution to the Board and to the future direction of our company."
Second Quarter 2009 Project Highlights
For more information on Enbridge's growth projects, please see the Recent Developments section of the Management's Discussion and Analysis.
- Construction of the Alberta Clipper crude oil pipeline remains on budget and on schedule to go into service by mid-2010. On July 20, 2009, Enbridge announced that it will fund two-thirds of the US$1.2 billion United States segment of the Alberta Clipper project in addition to the full Canadian segment.
- Construction of the Southern Lights diluent pipeline remains on budget and is scheduled to go into service in late 2010. The new light sour crude oil export pipeline (LSr Pipeline) from Cromer, Manitoba to Clearbrook, Minnesota and modifications to existing Line 2, were completed and placed into service in the first quarter of 2009. Construction of the second U.S. segment of the new diluent pipeline between Delavan, Wisconsin and Streator, Illinois was also completed during the first quarter of 2009.
- On July 29, 2009, Enbridge announced it had entered into Letters of Intent with Chevron Corp. that could result in the expansion of its central Gulf of Mexico offshore pipeline system. Under the terms of the LOI, Enbridge proposes to construct, own and operate the WRGS to provide natural gas gathering services to the potential Jack, St. Malo and Big Foot ultra deepwater developments. The WRGS is expected to include approximately 306 kilometres (190 miles) of 8-inch, 10-inch and/or 12-inch diameter pipeline at depths of up to 7,000 feet and will have a capacity of 100 million cubic feet per day. The estimated cost of the WRGS is approximately US$500 million, subject to finalization of scope and definitive cost estimates.
- On June 22, 2009, Enbridge announced it had been selected by subsidiaries of Imperial and ExxonMobil to provide for the transportation of production from the Kearl oil sands mine to crude oil hubs in the Edmonton, Alberta area. The pipeline will be phased with the mine expansion, with the first phase involving new build pipe from the mine to the Cheecham Terminal, and service on Enbridge's existing Waupisoo Pipeline from Cheecham to the Edmonton area. This portion of the project is scheduled to be in service in 2012. The estimated cost of the pipelines and related facilities is subject to finalization of scope, detailed engineering and regulatory approvals.
- In May 2009, Enbridge concluded a successful non-binding Open Season for the LaCrosse Pipeline. The proposed interstate natural gas pipeline would transport 1.0 to 1.8 billion cubic feet per day from Carthage, Texas, to Washington Parish in Southeastern Louisiana. Enbridge is moving forward with further development of plans for this interstate natural gas pipeline project that could interconnect with as many as 12 pipelines, depending on shipper interest. Enbridge also is exploring the possibility of extending the pipeline to Florida Gas Transmission's Station 10 near Wiggins, Mississippi. The proposed project is expected to be completed in early 2012.
- On June 30, 2009, the Government of Alberta announced that the EPCOR/Enbridge proposal for an integrated gasification combined-cycle (IGCC) carbon capture power generation facility at Genesee is one of three projects selected for the negotiation of letters of intent under the province's $2 billion program for large-scale CCS projects. The Genesee IGCC CCS project would be North America's first project combining an IGCC commercial-scale near-zero-emission thermal power plant with carbon capture, compression and storage. It has the potential to capture more than 3,300 tonnes per day or 1.2 million tonnes of carbon dioxide emissions a year. Enbridge would be responsible for transporting captured CO2 from the Genesee site for use in enhanced oil recovery or permanent storage in deep saline aquifers, and ASAP would be responsible for saline aquifer sequestration.
Dividend Declaration
On July 28, 2009, the Enbridge Board of Directors declared quarterly dividends of $0.37 per common share and $0.34375 per Series A Preferred Share. Both dividends are payable on September 1, 2009 to shareholders of record on August 17, 2009.
CONSOLIDATED EARNINGS Three months ended Six months ended June 30, June 30, (millions of Canadian dollars, ------------------------------------------ except per share amounts) 2009 2008 2009 2008 ---------------------------------------------------------------------------- Liquids Pipelines 96.9 76.3 187.9 152.4 Gas Pipelines 18.8 8.9 35.0 27.1 Sponsored Investments 42.9 22.0 74.3 53.1 Gas Distribution and Services 20.5 (15.7) 154.5 138.1International (1.8) 577.9 332.8 594.2 Corporate 215.7 (11.7) 166.6 (55.9) ---------------------------------------------------------------------------- Earnings Applicable to Common Shareholders 393.0 657.7 951.1 909.0 ---------------------------------------------------------------------------- Earnings per Common Share 1.08 1.83 2.62 2.53 ---------------------------------------------------------------------------- Diluted Earnings per Common Share 1.08 1.81 2.61 2.51 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
Earnings applicable to common shareholders were $393.0 million for the three months ended June 30, 2009, or $1.08 per common share, compared with $657.7 million, or $1.83 per common share for the three months ended June 30, 2008. In the second quarter of 2008, the Company recorded a $556.1 million after-tax gain on the sale of the Company's interest in Compania Logistica de Hidrocarburos CLH, S.A. (CLH). Net of this gain, earnings for the three months ended June 30, 2009 were $291.4 million higher than the comparable prior year period. This increase reflected a higher contribution from Enbridge Energy Partners (EEP), allowance for equity funds used during construction (AEDC) in Liquids Pipelines as well as unrealized fair value gains on derivative financial instruments used to risk manage commodity, foreign exchange and interest rate variability.
Earnings applicable to common shareholders were $951.1 million for the six months ended June 30, 2009, or $2.62 per common share, compared with $909.0 million, or $2.53 per common share for the same period in 2008. Included in earnings for the six months ended June 30, 2009 was $329.0 million related to the sale of the Company's investment in Oleoducto Central S.A. (OCENSA) and $24.9 million related to the sale of NetThruPut (NTP). Earnings for the six months ended June 30, 2008 included $556.1 million related to the sale of the Company's investment in CLH. Excluding the impact of these dispositions, earnings for the six months ended June 30, 2009 were $244.3 million higher than for the six months ended June 30, 2008. The increase in earnings resulted from similar factors as for the three months results.
Non-GAAP Measures
This news release contains references to adjusted earnings/(loss), which represent earnings applicable to common shareholders adjusted for non-recurring or non-operating factors on both a consolidated and segmented basis. These factors are reconciled and discussed in the Financial Results sections for the affected business segments. Management believes that the presentation of adjusted earnings/(loss) provides useful information to investors and shareholders as it provides increased transparency and predictive value. Management uses adjusted earnings/(loss) to set targets, assess performance of the Company and set the Company's dividend payout target. Adjusted earnings/(loss) and adjusted earnings/(loss) for each of the segments are not measures that have a standardized meaning prescribed by Canadian generally accepted accounting principles (GAAP) and are not considered GAAP measures; therefore, these measures may not be comparable with similar measures presented by other issuers. See Non-GAAP Reconciliations section for a reconciliation of the GAAP and non-GAAP measures.
ADJUSTED EARNINGS Three months ended Six months ended June 30, June 30, (millions of Canadian dollars, ------------------------------------------ except per share amounts) 2009 2008 2009 2008 ---------------------------------------------------------------------------- Liquids Pipelines 96.9 76.3 193.9 152.4 Gas Pipelines 17.3 11.2 33.5 26.6 Sponsored Investments 39.2 26.1 71.1 50.1 Gas Distribution and Services 35.6 28.6 165.8 149.8 International (1.8) 19.0 3.8 38.1 Corporate 7.3 (11.7) (4.2) (28.6) ---------------------------------------------------------------------------- Adjusted Earnings 194.5 149.5 463.9 388.4 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Adjusted Earnings per Common Share 0.54 0.42 1.28 1.08 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
Adjusted earnings were $194.5 million, or $0.54 per common share, for the three months ended June 30, 2009, compared with $149.5 million, or $0.42 per common share, for the three months ended June 30, 2008. Adjusted earnings were $463.9 million, or $1.28 per common share, for the six months ended June 30, 2009, compared with $388.4 million, or $1.08 per common share, for the six months ended June 30, 2008.
The following factors increased adjusted earnings in both the three and six month periods:
- AEDC on Southern Lights Pipeline and, within Enbridge System, on Alberta Clipper as well as Line 4, until April 2009 when Line 4 was placed into service.
- An increased contribution from EEP resulting from higher gas and crude oil delivery volumes, tariff surcharges for recent expansions, the Company's increased ownership interest and a favourable exchange rate.
- Increased adjusted earnings from Energy Services due to higher volumes and the impact of realizing favourable and, in some cases, previously "locked in" storage and transportation margins.
- Lower interest rates and resulting favourable interest expense within the Corporate segment.
These increases were partially offset by decreased earnings from International as a result of the sale of OCENSA in the first quarter of 2009 and CLH in the second quarter of 2008.
Liquids Pipelines Three months ended Six months ended June 30, June 30, ------------------------------------------ (millions of Canadian dollars) 2009 2008 2009 2008 ---------------------------------------------------------------------------- Enbridge System 65.5 49.8 124.0 101.5 Athabasca System 16.6 15.4 33.3 28.8 Spearhead Pipeline 2.4 2.2 5.7 5.4 Olympic Pipeline 1.9 2.4 4.2 4.8 Southern Lights Pipeline 12.2 4.2 27.5 8.9 Feeder Pipelines and Other (1.7) 2.3 (0.8) 3.0 ---------------------------------------------------------------------------- Adjusted Earnings 96.9 76.3 193.9 152.4 ---------------------------------------------------------------------------- Athabasca System - leak remediation costs - - (6.0) - ---------------------------------------------------------------------------- Earnings 96.9 76.3 187.9 152.4 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
While under construction, certain regulated pipelines are entitled to recognize AEDC in earnings. These amounts will contribute to earnings throughout the Company's significant growth period and will be collected in tolls once the pipelines are in service. The earnings impact of AEDC for the Enbridge System was $15.3 million (2008 - $4.0 million) for the three months ended June 30, 2009 and $30.4 million (2008 - $6.2 million) for the six months ended June 30, 2009. The earnings impact of AEDC for the Southern Lights Pipeline was $8.7 million (2008 - $4.2 million) for the three months ended June 30, 2009 and $19.7 million (2008 - $8.9 million) for the six months ended June 30, 2009.
- Enbridge System earnings included AEDC on Alberta Clipper as well as Line 4, until April 2009 when Line 4 was placed into service. These positive impacts were partially offset by higher labour costs and higher pipeline integrity costs. Earnings for the three months ended June 30, 2009 also included increased tolls resulting from a higher rate base due to the Line 4 Extension Project.
- The increase in Athabasca System adjusted earnings for the first six months of 2009, compared with the first half of 2008, reflected contributions from the Waupisoo Pipeline that went in service in June 2008 and the positive impact of terminal infrastructure additions.
- Higher Southern Lights Pipeline earnings reflected AEDC recognized on a growing capital base while the project continued to be under construction as well as earnings from the LSr Pipeline which became operational during the first quarter of 2009.
- The decrease in earnings in Feeder Pipelines and Other is primarily due to increased business development costs.
Liquids Pipelines earnings were impacted by a $6.0 million after-tax expense resulting from clean up and remediation costs related to a valve leak within the Enbridge Cheecham Terminal in January 2009.
Gas Pipelines Three months ended Six months ended June 30, June 30, ------------------------------------------(millions of Canadian dollars) 2009 2008 2009 2008 ---------------------------------------------------------------------------- Alliance Pipeline US 6.6 5.9 13.1 11.9 Vector Pipeline 3.6 3.0 9.3 7.0 Enbridge Offshore Pipelines (Offshore) 7.1 2.3 11.1 7.7 ---------------------------------------------------------------------------- Adjusted Earnings 17.3 11.2 33.5 26.6 ---------------------------------------------------------------------------- Alliance Pipeline US - shipper claim settlement - - - 2.8 Offshore - property insurance recovery from 2008 hurricanes 1.5 - 1.5 - Offshore - repair costs from 2005 hurricanes - (2.3) - (2.3) ---------------------------------------------------------------------------- Earnings 18.8 8.9 35.0 27.1 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
- Adjusted earnings for Vector Pipeline for 2009 were strengthened as a result of an increase in market demand and the impact of a stronger United States dollar.
- Offshore adjusted earnings for the three and six months ended June 30, 2009 included $3.8 million in insurance proceeds, which was an interim reimbursement for business interruption lost revenues and operating expenses associated with Hurricane Ike in 2008.
