Enbridge Energy Partners L.P. (EEP) reported significantly better-than-expected third-quarter 2010 earnings of 76 cents per unit, compared with the Zacks Consensus Estimate of 65 cents. However, earnings were lower than year-over-year figure of 86 cents.
Total revenue in the quarter increased 39% year over year to $1.89 billion, compared with the Zacks Consensus Estimate of $1.77 billion.
Despite crude oil spill in lines 6A and 6B during the quarter, solid contribution from the Liquids segment was the main driver of the strong results.
Importantly, Enbridge maintained its cash distribution rate of $1.0275 per unit or $4.11 per unit annualized in third quarter. The partnership also maintained its earnings guidance for full-year 2010 to a range of $410 million to $430 million.
Operational Performance
Operating income in the Liquids segment increased nearly 29% year over year to $170.7 million, primarily driven by transportation rate increases. The increased operating income was partially offset by lower delivery volumes due to oil spill in lines 6A and 6B in the Lakehead system.
The partnership’s volumes in the liquid system decreased 3.6% year over year to 1,976 thousand barrels per day. The decrease was mainly due to Lakehead and mid-continent systems. However, delivery in the North Dakota system increased approximately 54% from the year-earlier level.
Operating income in the Natural Gas segment decreased more than 28% year over year to $33.7 million due to lower volumes and higher operating costs.
During the quarter, Natural Gas volumes increased nearly 4% from the year-earlier period to 2,381,000 million British thermal units per day. The main contributor to this increase was Anadarko natural gas system, which was up 22% from the year-earlier quarter. The Marketing segment reported an adjusted operating income of $1.1 million during the quarter, compared with $0.2 million in the corresponding quarter last year.
Outlook
Management believes that the acquisition of the ElkCity natural gas gathering and processing system and the announcement of North Dakota crude oil transportation system expansion will be the catalysts for long-term growth.
The expansion and diversification of Enbridge’s asset base over the past few years have created opportunities for internal growth prospects. While long-term prospects for the partnership’s primary liquids transportation asset, the Lakehead System, are positives, we see limited volume growth opportunities in the near to medium term. Our long term Neutral recommendation remains unchanged with the company’s Zacks #3 Rank (Hold) for the short term.
ENBRIDGE EGY PT (EEP): Free Stock Analysis Report
Zacks Investment Research
