Enbridge (ENB) Chalks Out Oil & Gas Pipeline Expansion Plans

Midstream energy player Enbridge Inc. ENB announced its intention to expand its oil and gas pipelines to support the rising output of commodities in Western Canada.

The development will include the expansion of both the major oil pipeline network and the recently acquired pipeline carrying natural gas in British Columbia.

It is to be noted that the bidding phase for the capacity expansion of the T-South pipeline has been closed. The company is willing to spend roughly C$1 billion that is likely to expand the transportation capacity of the pipeline by 190 million cubic feet per day.  

Once the T-South pipeline starts transporting new capacity from northern British Columbia and Vancouver, it will serve room heating purposes for majority of the customers in Vancouver.

It is to be noted that Canadian gas producers are also helping Enbridge to carry on with the expansion project. Undoubtedly, the company is expected to generate considerable cash flows once the pipelines start operating at full capacity.

Headquartered in Calgary, Alberta, Enbridge is an energy infrastructure company. The business scenario is not favorable for the company given that oil and gas prices are trading way below the mid-2014 levels. With the drop in commodity prices, there is little incentive for the upstream companies to carry on with exploration and production activities which could dent demand for new midstream infrastructures.

Also, the company has alarmingly high debt levels. Since 2011, Enbridge's long-term debt has been increasing steadily reflecting weak financials. Moreover, the company's stock fell almost 9% over the last one year against 10% improvement for the Zacks categorized Oil & Gas-Production/Pipeline industry.

As a result, Enbridge currently carries a Zacks Rank #5 (Strong Sell).

Better-ranked players in the energy sector include Canadian Natural Resources Limited CNQ, McDermott International Inc. MDR and W&T Offshore Inc. WTI. Canadian Natural and McDermott sport a Zacks Rank #1 (Strong Buy), while W&T Offshore carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.      

We expect year-over-year earnings growth for Canadian Natural of 720% for 2017. 

McDermott beat the Zacks Consensus Estimate in each of the trailing four quarters, the average positive surprise being 387.50%.   

W&T Offshore had an average positive earnings surprise of 69.21% for the last four quarters.

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