10-QPeriod: Q2 FY2019

ENBRIDGE INC Quarterly Report for Q2 Ended Jun 30, 2019

Filed August 2, 2019For Securities:ENBENBMFEBBGFEBRGFEBRZFENBGFENBRFENFFFEBGEFENBFFENBHFENBNFENBOFENBSFEBBNFENNPF

Summary

Enbridge Inc. reported its financial results for the second quarter and first half of 2019. The company demonstrated strong revenue growth, driven primarily by its Liquids Pipelines segment, which saw increased throughput and favorable toll rates. Higher distribution rates and customer growth also contributed positively to the Gas Distribution segment's performance. Overall, Enbridge reported a significant increase in earnings attributable to common shareholders for both the quarter and the half-year compared to the prior year. This improvement was driven by operational strength across its core businesses, as well as favorable impacts from derivative fair value adjustments and foreign currency translation. The company also highlighted its ongoing commitment to growth through secured projects across its various segments, with a substantial pipeline of projects slated for completion between 2019 and 2023. However, investors should note potential headwinds such as delays in the U.S. Line 3 Replacement Program and the recent Texas Eastern pipeline rupture, which could impact future performance and require significant attention.

Key Highlights

  • 1Enbridge reported a substantial increase in earnings attributable to common shareholders, with diluted EPS of $0.86 for Q2 2019 and $1.80 for the first half of 2019, up from $0.63 and $0.90 in the prior year periods, respectively.
  • 2Total operating revenues increased to $13,263 million for Q2 2019 and $26,119 million for the first half, up from $10,745 million and $23,471 million in the respective prior year periods.
  • 3The Liquids Pipelines segment showed strong performance, with EBITDA increasing due to higher throughput and favorable toll rates, partially offset by a weaker foreign exchange hedge rate.
  • 4The Gas Distribution segment saw increased earnings due to higher distribution rates and customer base, alongside colder weather impacting the Q2 results positively.
  • 5The company has a robust portfolio of $19 billion in secured growth projects, with many expected to come online between 2019 and 2023, supporting future revenue and earnings growth.
  • 6Despite operational strengths, Enbridge faces challenges including delays in the U.S. Line 3 Replacement Program, with potential cost overruns due to permitting issues.
  • 7A significant incident occurred on August 1, 2019, with a rupture on the Texas Eastern natural gas pipeline system, resulting in one confirmed fatality and an ongoing investigation by the NTSB.

Frequently Asked Questions

Enbridge reported increased total operating revenues to $13,263 million in Q2 2019 and $26,119 million in the first half of 2019. Earnings attributable to common shareholders also saw a significant rise, with diluted EPS reaching $0.86 for Q2 and $1.80 for the first half of 2019, compared to $0.63 and $0.90 in the prior year periods.

The Liquids Pipelines segment was a strong performer, driven by higher throughput on key pipelines like Flanagan South and Seaway Crude, along with a favorable International Joint Tariff Benchmark Toll. The Gas Distribution segment also showed improvement due to higher distribution rates, customer growth, and colder weather patterns influencing Q2 results.

Enbridge has a substantial portfolio of $19 billion in secured growth projects across its business segments, with many scheduled for service between 2019 and 2023. Key projects include the Gray Oak Pipeline, Canadian and U.S. Line 3 Replacement Programs, and the Atlantic Bridge expansion. However, the U.S. Line 3 Replacement Program is facing permitting delays and potential cost overruns.

Yes, two key points of concern are the ongoing permitting delays and potential cost increases for the U.S. Line 3 Replacement Program. Additionally, a serious incident occurred on August 1, 2019, involving a rupture on the Texas Eastern natural gas pipeline system in Kentucky, resulting in a fatality and an ongoing investigation. The financial impact of this event is yet to be fully determined.