In This Article:
By Amanda Stephenson and Arunima Kumar
(Reuters) -Canadian pipeline operator Enbridge exceeded market estimates for first-quarter profit on Friday, driven in part by higher earnings from its Mainline crude pipeline system which it said customers want to see expanded in spite of lower oil prices.
The Calgary, Alberta-based company's Mainline system is the largest pipeline system in North America, moving crude from Western Canada to markets in Eastern Canada and the U.S. Midwest.
Enbridge said the Mainline system was full to capacity the entire first quarter, delivering a first-quarter record of 3.2 million barrels per day. The Mainline saw a rise in first-quarter adjusted core profit to C$1.45 billion, from C$1.34 billion last year.
Enbridge has been in talks with customers to add incremental capacity along the existing Mainline pipeline network to meet growing demand for oil export capacity from Canada.
The company forecasts the need for around 1 million barrels per day of additional pipeline space out of Western Canada by 2035 as the country's oil sands operators increase production.
Enbridge expects to make a final investment decision on the first phase of its Mainline project — which would add 150,000 barrels per day of capacity to the network and would include an expansion of the Flanagan South pipeline, a 954-km segment that runs from Illinois to Cushing, Oklahoma — later this year, CEO Greg Ebel said on a conference call.
Ebel said the bullish stance on the need for additional oil pipeline capacity in North America has not changed, in spite of a significant decline in oil prices this spring.
"Those shorter-term swings, which we watch very closely, can have some impact on production but they don't change the long-term view of energy demand and need," Ebel said.
Enbridge also saw a rise in earnings from its gas distribution unit to C$1.60 billion ($1.15 billion), from C$765 million last year.
Enbridge, along with I Squared and MPLX, announced a deal on May 6 to acquire up to 85% of the Matterhorn Express gas pipeline, a deal that will see the company continue to build its footprint in the U.S. Permian basin.
Enbridge, which said it expects to have an equity interest in 30% of the total natural gas pipeline capacity in the Permian by 2025, is paying close attention to how operators in that basin are responding to the lower pricing environment.
Some companies in the Permian are already beginning to drop drilling rigs in light of the lower oil prices.
But Ebel said the contracted nature of Enbridge's pipeline business will help to shelter it from any slowdown in production activity in the region.