On Oct 9, 2013, Zacks Investment Research downgraded oil and
gas pipeline operator
Enbridge Energy Partners, L.P.
) to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
The partnership delivered a negative earnings surprise of
40.9% in the second quarter 2013. The long-term expected sales
growth of Enbridge is set at a negative 2.77%.
The impact of the Cushing crude oil storage terminal outage, a
low cash balance and rising natural gas and liquids inventory are
acting as a growth deterrent for Enbridge Energy.
The partnership's cash balance dwindled 88% to $27.3 million
as of Jun 30, 2013 from $227.9 million as of Dec 31, 2012. The
2010 Michigan oil spill has also been weighing on Enbridge's
The high capital expenditure required for Enbridge's ambitious
growth plans over the next few quarters may reduce cash
The partnership was also slapped with charges in Jul 2013 by
the Environmental Protection Agency for permit violations for the
discharge of hydrotest water in 2010 related to the Alberta
In addition, Enbridge's midstream natural gas business is
likely to remain depressed in the upcoming quarters. The Energy
Information Administration estimates a 5.5% decline in petroleum
products prices in 2014 from 2012 which will affect Enbridge's
Other Stocks to Consider
However, all industry players are not doing as badly as
Enbridge Energy Partners. Stocks presently looking attractive are
Zacks Ranked #2 (Buy)
Energy Transfer Partners, L.P.
Kinder Morgan Energy Partners, L.P.
Magellan Midstream Partners L.P.
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