CALGARY, ALBERTA — (Marketwired) — 05/08/13 — HIGHLIGHTS
(all financial figures are unaudited and in Canadian dollars)
Enbridge Inc. (TSX: ENB) (NYSE: ENB) – “Enbridge–s businesses performed well in the first quarter,” said Al Monaco, President and Chief Executive Officer, Enbridge Inc. (Enbridge or the Company). “Although we are pleased to be off to a good start, we expect more moderate growth for the balance of the year and we are maintaining our full year adjusted earnings guidance target range of $1.74 to $1.90 per share. We continue to be on track and on budget with the execution of a record number of commercially secured growth projects which we expect will provide a foundation for growth beyond 2013. This includes ten projects which will have at least an initial phase go into service by the end of this year.”
Operations
The Company continued to realize strong results from its core businesses in the first quarter of 2013. Significant operating highlights included strong throughput on the Canadian Mainline as the combination of strong supply from the oil sands and wide crude oil price differentials between Canadian and United States midwest refinery markets increased long-haul barrels on the Enbridge system. Liquids Pipelines earnings for the first three months of the year were further bolstered by contributions from recently sanctioned assets, including the startup of the Wood Buffalo and Woodland pipelines, as well as earnings from the Company–s interest in the Seaway Crude Pipeline System (Seaway Pipeline), which commenced preliminary service in May 2012 and was further expanded in January 2013. Energy Services had another strong quarter as wide location and crude grade differentials provided attractive arbitrage opportunities. Enbridge Gas Distribution Inc. (EGD) also contributed to the overall earnings growth quarter-over-quarter; however, due to the quarterly timing of revenues and costs, EGD is expected to deliver full year results that are comparable with the prior year.
Within Sponsored Investments, the stable performance of the liquids pipelines assets within Enbridge Energy Partners, L.P. (EEP) was offset by a decrease in earnings from its gas gathering and processing businesses which continued to be challenged by the low natural gas and natural gas liquids commodity price environment. In March, EEP received an order from the United States Environmental Protection Agency (EPA) (the Order) requiring additional containment and active recovery of submerged oil relating to the 2010 Line 6B crude oil release. As a result of the Order, EEP recognized an additional accrual of US$175 million ($24 million after-tax attributable to Enbridge) in the first quarter. Contributions from Enbridge Income Fund (the Fund) in the first quarter reflected a full quarter of earnings from renewable energy and crude oil storage assets dropped down to the Fund in late 2012; however, this increase was offset by a small one-time write-off of a regulatory deferral account.
The Company–s earnings will continue to reflect, as was the case in the first quarter of 2013, changes in unrealized mark-to-market accounting impacts related to the comprehensive long-term economic hedging program Enbridge has in place to mitigate exposures to interest rate variability and foreign exchange, as well as commodity prices. The Company believes that the hedging program supports the generation of reliable cash flows and dividend growth.
Continued Growth
Addressing crude oil market access challenges continues to be a key driver of Enbridge–s growth strategy.
“Increasing North American supply is resulting in a shortage of pipeline takeaway capacity to the right markets. We recognized the importance of reducing transportation bottlenecks some time ago, and we–ve been working with our customers to find solutions – from improving the efficiency of our liquids pipelines systems to a full suite of market access initiatives that will open new or expanded markets as they come into service this year and next, and all of them are expected to be operating by 2016. These projects will add significant value for our customers and our shareholders,” said Mr. Monaco.
Since the beginning of the year, Enbridge has continued to add to its already robust portfolio of commercially secured growth projects.
In Liquids Pipelines, Enbridge announced new agreements with regional oil sands shippers for facilities and transportation services. In March, Enbridge agreed to invest $0.2 billion in a project to provide pipeline and terminaling services to the proposed Athabasca Oil Corporation–s (AOC) Hangingstone Oil Sands Project (AOC Hangingstone). Enbridge subsequently announced in May, an agreement with ConocoPhillips Canada Resources Corp. and Total E&P Canada Ltd. (the ConocoPhillips Surmont Partnership) to expand existing infrastructure at the Enbridge Cheecham Terminal to accommodate incremental bitumen production from Surmont–s Phase 2 expansion.
“Enbridge is working collaboratively with Alberta producers to deliver transportation solutions that are innovative and cost-effective,” said Mr. Monaco. “The reach and flexibility of our existing regional oil sands systems enable us to meet our customers– near-term needs as well as offer scalability to accommodate their future growth.”
Enbridge, with joint venture partner Enterprise Products Partners, L.P. (Enterprise), also completed the addition of further pump stations on the Seaway Pipeline, increasing that system–s available capacity out of the Cushing, Oklahoma hub to up to 400,000 barrels per day (bpd) depending on crude oil slate. Actual throughput experienced in the first quarter of 2013 was curtailed due to third party takeaway constraints. These constraints are expected to be eliminated in the fourth quarter of 2013 when a lateral from the Seaway Jones Creek tankage to the ECHO crude oil terminal (ECHO Terminal) is completed. However, capacity is also expected to be limited by increased nominations of heavy crude oil until the first quarter of 2014 when the Seaway Pipeline twin is expected to come into service.
“Enbridge continues to advance initiatives to offer new market access options for producers with an emphasis on adding capacity to reach the best markets,” said Mr. Monaco. “With the increased capacity on the existing Seaway Pipeline from Cushing to the Western Gulf Coast now in service and serving Houston area refineries, we and our partner, Enterprise are now focused on bringing the Seaway Pipeline twinning into service with another 450,000 bpd of capacity. We are very pleased that this project is running ahead of schedule and is now expected to be available for service in the first quarter of 2014.
“We also announced in February 2013 a new project to create the first pipeline transportation option from the mid-continent to the Eastern Gulf Coast market. With our joint venture partner, Energy Transfer Partners, L.P. we are making progress in developing the Eastern Gulf Crude Access Pipeline, a project to reverse and repurpose an existing, underutilized gas pipeline. Capitalizing on existing infrastructure is key to minimizing the industry–s footprint and delivering solutions faster and at lower cost than new build.”
In January 2013, the Company announced the further expansion of its mainline system, in both Canada and the United States, by an additional 230,000 bpd, providing greater capacity for producers in the face of increasing North American crude oil supply.
The Bakken remains a core focus for Enbridge and the Bakken Expansion Program was completed and placed into service in March 2013, complemented by the commencement of operations at the Berthold Rail facility in North Dakota.
In April 2013, EEP announced plans to construct the Beckville cryogenic natural gas processing plant, which will bring EEP–s processing capacity to approximately 820 million cubic feet per day (mmcf/d) in the Cotton Valley and Haynesville shale regions.
“Execution is one of our top priorities and maintaining and strengthening this core competency is critical to achieving our growth objectives,” said Mr. Monaco. “We remain on or ahead of schedule and on or under budget on the majority of our 33 projects currently under development.”
Expanding its renewable power platform, Enbridge announced in April the securement of a 50% interest in the development of Blackspring Ridge Wind Project (Blackspring Ridge).
“Blackspring Ridge is the largest wind project in Western Canada and will add significant generating capacity to our green energy portfolio, reinforcing our position as Canada–s second largest generator of wind power,” said Mr. Monaco. “The site has an excellent wind resource and access to transmission, with the price of electricity substantially fixed through long-term contracts to be sold into the Alberta power pool. In addition to the strong risk-reward profile of these investments, growing our renewable assets contributes to our ability to meet, and exceed, our Neutral Footprint program commitment to generate a kilowatt of renewable energy for every additional kilowatt of power used in our operations. The acquisition of Blackspring Ridge brings our Enbridge-wide interest in renewable generation up to 1,600 megawatts.”
In May, Enbridge announced it entered into an agreement to invest $1.2 billion in preferred units issued by EEP to reduce the amount of third party financing required by EEP to fund its share of the Company–s organic growth program. Concurrent with the issuance, EEP also announced it expects to exercise its option in both the Eastern Access and Lakehead System Mainline Expansion Joint Funding Agreements to reduce its economic interest and associated funding of these respective projects from 40% to 25% by the June 30, 2013 deadline. EEP will retain the option to increase its economic interest back up to 40% in both projects within one year of the final project in-service dates.
“This financing arrangement and the exercise of the joint funding option will enable EEP to finance its $8.5 billion in growth projects in the most efficient manner with the most amount of flexibility for EEP, benefitting both EEP and Enbridge,” said Mr. Monaco.
Enbridge–s focus on safety and operational reliability was reinforced in January with the appointment of a new Senior Vice President to provide central coordination of these priorities across the enterprise.
“Our number one goal is achieving industry leadership in the reliability and integrity of our pipelines and facilities, and protection of the environment,” said Mr. Monaco. “Being a leader in these areas enables everything else we do – including sustaining the growth of our company into the future.”
“Enbridge–s top three priorities of safety and operational reliability, execution and extending our growth beyond 2016 will continue to drive our decisions and actions over coming years,” concluded Mr. Monaco. “Our value proposition is strong – we–re well positioned to expand and to extend into new markets, enabling us to create value for our customers and our shareholders. We have confidence that we–ll be able to maintain our industry-leading growth.”
FIRST QUARTER 2013 OVERVIEW
For more information on Enbridge–s growth projects and operating results, please see the Management–s Discussion and Analysis (MD&A) which is filed on SEDAR and EDGAR and also available on the Company–s website at . We further draw your attention to Note 2, Revision of Prior Period Financial Statements to the Consolidated Financial Statements as at and for the three months ended March 31, 2013 which discusses a non-cash revision to comparative financial statements. The discussion and analysis included herein is based on revised financial results for the three months ended March 31, 2012.
Since the end of 2012, the Company completed the following financing transactions:
DIVIDEND DECLARATION
On April 23, 2013, the Enbridge Board of Directors declared the following quarterly dividends. All dividends are payable on June 1, 2013 to shareholders of record on May 15, 2013.
CONFERENCE CALL
Enbridge will hold a conference call on Wednesday, May 8, 2013 at 9:00 a.m. Eastern Time (7:00 a.m. Mountain Time) to discuss the first quarter 2013 results. Analysts, members of the media and other interested parties can access the call toll-free at 1-800-447-0521 from within North America and outside North America at 1-847-413-3238, using the access code of 34629096. The call will be audio webcast live at . A webcast replay and podcast will be available approximately two hours after the conclusion of the event and a transcript will be posted to the website within 24 hours. The replay will be available toll-free at 1-888-843-7419 within North America and outside North America at 1-630-652-3042 (access code 34629096) until May 15, 2013.
The conference call will begin with presentations by the Company–s President and Chief Executive Officer and the Chief Financial Officer, followed by a question and answer period for investment analysts. A question and answer period for members of the media will then immediately follow.
Enbridge Inc. is a North American leader in delivering energy and has been included on the Global 100 Most Sustainable Corporations in the World ranking for the past five years. As a transporter of energy, Enbridge operates, in Canada and the U.S., the world–s longest crude oil and liquids transportation system. The Company also has a significant and growing involvement in the natural gas gathering transmission and midstream businesses, and an increasing involvement in power transmission. As a distributor of energy, Enbridge owns and operates Canada–s largest natural gas distribution company, and provides distribution services in Ontario, Quebec, New Brunswick and New York State. As a generator of energy, Enbridge has interests in over 1,600 megawatts of renewable and alternative energy generating capacity and is expanding its interests in wind, solar and geothermal energy. Enbridge employs more than 10,000 people, primarily in Canada and the U.S., and is ranked as one of Canada–s Greenest Employers, and one of Canada–s Top 100 Employers for 2013. Enbridge is included on the 2012/2013 Dow Jones Sustainability World Index and the Dow Jones Sustainability North American Index. Enbridge–s common shares trade on the Toronto and New York stock exchanges under the symbol ENB. For more information, visit . None of the information contained in, or connected to, Enbridge–s website is incorporated in or otherwise part of this news release.
Forward-Looking Information
Forward-looking information, or forward-looking statements, have been included in this news release to provide the Company–s shareholders and potential investors with information about the Company and its subsidiaries and affiliates, including management–s assessment of Enbridge–s and its subsidiaries– future plans and operations. This information may not be appropriate for other purposes. Forward-looking statements are typically identified by words such as “anticipate”, “expect”, “project”, “estimate”, “forecast”, “plan”, “intend”, “target”, “believe” and similar words suggesting future outcomes or statements regarding an outlook. Forward-looking information or statements included or incorporated by reference in this document include, but are not limited to, statements with respect to: expected earnings/(loss) or adjusted earnings/(loss); expected earnings/(loss) or adjusted earnings/(loss) per share; expected future cash flows; expected costs related to projects under construction; expected in-service dates for projects under construction; expected capital expenditures; estimated future dividends; and expected costs related to leak remediation and potential insurance recoveries.
Although Enbridge believes these forward-looking statements are reasonable based on the information available on the date such statements are made and processes used to prepare the information, such statements are not guarantees of future performance and readers are cautioned against placing undue reliance on forward-looking statements. By their nature, these statements involve a variety of assumptions, known and unknown risks and uncertainties and other factors, which may cause actual results, levels of activity and achievements to differ materially from those expressed or implied by such statements. Material assumptions include assumptions about: the expected supply and demand for crude oil, natural gas, natural gas liquids (NGL) and green energy; prices of crude oil, natural gas, NGL and green energy; expected exchange rates; inflation; interest rates; the availability and price of labour and pipeline construction materials; operational reliability; customer and regulatory approvals; maintenance of support and regulatory approvals for the Company–s projects; anticipated in-service dates; and weather. Assumptions regarding the expected supply and demand of crude oil, natural gas, NGL and green energy, and the prices of these commodities, are material to and underlie all forward-looking statements. These factors are relevant to all forward-looking statements as they may impact current and future levels of demand for the Company–s services. Similarly, exchange rates, inflation and interest rates impact the economies and business environments in which the Company operates, may impact levels of demand for the Company–s services and cost of inputs, and are therefore inherent in all forward-looking statements. Due to the interdependencies and correlation of these macroeconomic factors, the impact of any one assumption on a forward-looking statement cannot be determined with certainty, particularly with respect to expected earnings/(loss) or adjusted earnings/(loss) and associated per share amounts, or estimated future dividends. The most relevant assumptions associated with forward-looking statements on projects under construction, including estimated in-service date and expected capital expenditures include: the availability and price of labour and construction materials; the effects of inflation and foreign exchange rates on labour and material costs; the effects of interest rates on borrowing costs; and the impact of weather and customer and regulatory approvals on construction schedules.
Enbridge–s forward-looking statements are subject to risks and uncertainties pertaining to operating performance, regulatory parameters, project approval and support, weather, economic and competitive conditions, tax rate increases, exchange rates, interest rates, commodity prices and supply and demand for commodities, including but not limited to those risks and uncertainties discussed in this news release and in the Company–s other filings with Canadian and United States securities regulators. The impact of any one risk, uncertainty or factor on a particular forward-looking statement is not determinable with certainty as these are interdependent and Enbridge–s future course of action depends on management–s assessment of all information available at the relevant time. Except to the extent required by law, Enbridge assumes no obligation to publicly update or revise any forward-looking statements made in this news release or otherwise, whether as a result of new information, future events or otherwise. All subsequent forward-looking statements, whether written or oral, attributable to Enbridge or persons acting on the Company–s behalf, are expressly qualified in their entirety by these cautionary statements.
NON-GAAP MEASURES
This news release contains references to adjusted earnings/(loss), which represent earnings or loss attributable to common shareholders adjusted for unusual, non-recurring or non-operating factors on both a consolidated and segmented basis. These factors, referred to as adjusting items, are reconciled and discussed in the financial results sections of the MD&A for the affected business segments. Management believes 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 U.S. GAAP and are not considered GAAP measures; therefore, these measures may not be comparable with similar measures presented by other issuers.
NON-GAAP RECONCILIATIONS
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