Houston, Texas-based master limited partnership (MLP)
Enbridge Energy Partners L.P.
) lowered its full year 2012 forecast to account for the timid
natural gas liquids (NGLs) price environment.
Enbridge now expects adjusted net income for 2012 in the range
of $440−$470 million, which is down from the previous forecast of
$510−$550 million. The partnership also pointed out that it intends
to reduce its spending toward natural gas business in the near term
given the volatile natural gas and NGL commodities market.
Although the partnership remains apprehensive for its natural
gas business in the near future, it stated that the adverse effect
will be mitigated by its existing commodity hedging provisions.
Enbridge reaffirmed its cash distribution growth target of 2-5%
over the next couple of years. It remains upbeat about the
performance of the liquids pipeline systems. The projects -- the
majority of which will likely be productive in 2013 -- are driven
by the sharp rise in liquids drilling from prolific shale plays in
the U.S., including the Bakken Expansion, Seaway Reversal/Expansion
and the Texas Express NGL pipeline.
Meanwhile, the partnership faces a record $3.7 million fine by
the U.S. Department of Transportation's pipeline regulation agency
-- Pipeline and Hazardous Material Safety Administration (PHMSA) --
due to a 2010 oil spill from its pipeline in Michigan. The
incident, which took place in July 2010, spilled more than 20,000
barrels of oil near the Kalamazoo River, in what is considered one
of the largest pipeline leaks in the U.S.
While we treat this leakage as a one-off event, the
partnership's investment strategy and the diversification of its
asset base are the key factors that have created opportunities for
long-term growth. Enbridge's organic growth program is also
impressive, and its commitment of return value to unitholders is
reflected through its distribution growth guidance.
Enbridge Energy units have a Zacks #3 Rank (short-term Hold
recommendation), with an unchanged long-term Neutral
recommendation. Intense competition from MLPs such as
Kinder Morgan Energy Partners L.P.
Enterprise Products Partners L.P.
) is an added cause for concern.
ENBRIDGE EGY PT (EEP): Free Stock Analysis
ENTERPRISE PROD (EPD): Free Stock Analysis
KINDER MORG ENG (KMP): Free Stock Analysis
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