10-QPeriod: Q1 FY2020

ENBRIDGE INC Quarterly Report for Q1 Ended Mar 31, 2020

Filed May 7, 2020For Securities:ENBENBMFEBBGFEBRGFEBRZFENBGFENBRFENFFFEBGEFENBFFENBHFENBNFENBOFENBSFEBBNFENNPF

Summary

Enbridge Inc.'s first quarter 2020 results were significantly impacted by the emerging COVID-19 pandemic and a substantial decline in commodity prices. The company reported a net loss attributable to common shareholders of C$1.429 billion (or C$0.71 loss per share) for the three months ended March 31, 2020, a sharp decline from the net earnings of C$1.891 billion (or C$0.94 per share) in the prior year period. This loss was largely driven by a C$1.736 billion impairment charge related to its equity investment in DCP Midstream and significant unrealized derivative fair value losses. Despite the challenging environment, Enbridge highlighted the resilience of its business model, characterized by highly contracted assets, long-term agreements, and strong customer relationships. The company took proactive measures to strengthen its financial position, including reducing operating costs, asset sales, and increasing liquidity to approximately C$14 billion. While the full impact of the pandemic and low commodity prices remains uncertain, Enbridge is focused on maintaining operational reliability and safety while navigating the evolving economic landscape.

Key Highlights

  • 1Reported a net loss attributable to common shareholders of C$1.429 billion for Q1 2020, compared to net earnings of C$1.891 billion in Q1 2019.
  • 2Recorded a significant C$1.736 billion impairment charge on its equity investment in DCP Midstream due to declining market prices.
  • 3Experienced a substantial increase in unrealized derivative fair value losses, contributing to the net loss.
  • 4Liquids Pipelines segment EBITDA decreased significantly due to unrealized derivative losses, though underlying operational performance showed some strengths.
  • 5Gas Transmission and Midstream segment EBITDA was negatively impacted by the DCP Midstream impairment and a rate case settlement adjustment.
  • 6The company is taking steps to manage costs and enhance liquidity, with approximately C$14 billion in available liquidity at quarter-end.
  • 7Future outlook is uncertain due to the ongoing COVID-19 pandemic and volatile commodity prices, with potential impacts on volumes and operations.

Frequently Asked Questions

The primary driver for the significant drop in earnings was a C$1.736 billion impairment charge related to Enbridge's equity investment in DCP Midstream, coupled with substantial unrealized derivative fair value losses. These items, along with other factors, resulted in a net loss attributable to common shareholders for the quarter.

Enbridge is implementing several measures, including reducing operating costs by approximately C$300 million, executing asset sales, and increasing available liquidity to approximately C$14 billion. The company is also emphasizing the resilience of its business model, which relies on highly contracted assets and long-term agreements, and maintains strong customer relationships.

The Liquids Pipelines segment's EBITDA was negatively impacted by unrealized derivative losses. While underlying operational performance showed some strengths, such as higher throughput on the Mainline System, the company anticipates reduced volumes in the second quarter of 2020 due to lower demand caused by COVID-19 and commodity price declines. The full impact remains uncertain, but Enbridge expects volumes to recover in the latter half of the year.

While earnings were significantly impacted, Enbridge has actively worked to maintain a strong financial position. The company highlighted its substantial liquidity of approximately C$14 billion and its ability to fund capital projects and debt maturities through 2021 without accessing capital markets, even with potential market disruptions.