) announced its plans to invest up to $200 million to build a
31-mile long pipeline with 16-inch diameter, stretching from the
Hangingstone Oil Sands Project to the company's Cheecham
Terminal. The pipeline would be the ninth oil sand project
connected to Enbridge's regional network.
ENBRIDGE INC (ENB): Free Stock Analysis
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In addition, the company will complete required operational
alterations at its Cheecham terminal to manage the added yield.
This pipeline set up is subject to the Energy Resources
Conservation Board and other regulatory approvals. Enbridge is
expected to start its pipeline development activities from the
winter of 2014/2015.
Enbridge had already signed an agreement to provide pipeline and
terminaling services to Athabasca Oil Corporation for the
proposed Hangingstone Oil Sands Project by the latter. The
initial term of this contract will be 25 years and Athabasca Oil
will enjoy the right to extend the agreement in successive
five-year terms for a total contract life of 45 years.
Per the agreement, Enbridge will offer pipeline transportation
services to its Regional Oil Sands System, Edmonton, Alberta for
bitumen produced from the Hangingstone Project.
This pipeline set up has two phases. The pipeline will enable to
transport 16,000 barrels per day (bpd) of diluted bitumen in
Phase 1 and subsequently scale up the supply level to a further
60,000 bpd from Phase 2, which will be assigned to the Enbridge
regional operations, if authorized. The Phase I facilities are
expected to be online in the second half of 2015. It is evident
from Enbridge's latest investments that it is expanding its
coverage in Edmonton.
Earlier, in Jan 2013, the company planned to invest up to $400
million to expand its Canadian mainline system between Hardisty,
Alberta, and the U.S. border. The pipeline is an extension of
Enbridge's pipeline construction plan at Edmonton and Hardisty,
announced in Nov 2012. The expansion will augment the capacity by
230,000 bpd and involves increased pumping horsepower.
As of Dec 31, 2012, Enbridge had a cash balance of $1.8 billion
and cash provided by operating activities were $503.6 million.
The company's strong financial position enables it to continue
with various organic projects.
However, we remain apprehensive about the company's midstream
natural gas business, which is sensitive to changes in natural
gas supply-demand fundamentals and commodity cycles associated
with gas processing margins.
Enbridge Inc. currently has a Zacks Rank #4 (Sell). Other stocks
from the industry that are presently performing well include
) with Zacks Rank #1 (Strong Buy), and
EQT Midstream Partners LP
Oiltanking Partners L.P.
) with Zacks Rank #2 (Buy).