Enbridge Energy Partners Pulls in a Very Predictable Earnings Result

Enbridge Energy Partners (EEP) announced its quarterly earnings on Monday. It's a company that's built on fixed-fee services, and its results were pretty much what you would have expected. Here's a quick snapshot of what the quarter looked like for Enbridge Energy Partners, and what it means in the big picture. 

Enbridge Energy Partner's quarter: By the numbers

Source: Enbridge Energy Partners earnings release.

One thing to keep in mind when looking at the income statement of a pipeline company like Enbridge, revenue is a rather misleading figure. Most of the time, the decline in cost of goods sold will more than accommodate the decline in revenue. You can see this in the results as revenue for Enbridge Energy Partners declined by 34%, while adjusted EBITDA increased more than 13% during the same time period.

Most of the increases in adjusted EBITDA came from increased volumes of crude oil in the system combined with higher storage levels of natural gas and NGL across the entire system. These volume increases also helped to offset some of the lower price realizations from its limited commodity price exposure.

What Happened with Enbridge Energy Partners this quarter

• An extension of the company's U.S. mainline was completed back in July, giving Enbridge Energy Partners another 230,000 barrels per day of throughput capacity on the line.
• Company expects to remain on track to receive $500 million in asset drop downs annually from parent company Enbridge (ENB 1.68%) through 2019.
• Closed the offering of $1.6 billion in unsecured senior notes to pay for organic growth projects, as well as some of the aforementioned drop downs.
• The partnership was able to maintain its investment-grade credit rating even after this large debt issuance and the recent decline in the energy market, an accomplishment that is nothing to scoff at. 
• The board of directors declared a $0.583 per-share distribution, a 5% increase from the third quarter of 2014.

What management had to say
On the question about low oil prices impacting Enbridge's results:

We're often asked about how the current low commodity price environment affects our business. We do not anticipate the current environment of low crude oil prices to materially affect the underlying earnings and cash flows from our liquids pipelines business. More than half of the partnership's cash flows are underpinned by long-term cost for service -- cost of service arrangements, which have no volume sensitivity -- CFO Stephen J. Neyland

On the continued demand for Enbridge's pipeline with oil and gas activity on the decline:

We are continuing to make good progress in our liquids pipeline market access programs. These projects are designed to enhance pipeline connectivity to the premium North American crude oil markets. Demand for crude oil from Western Canada and the Bakken remains very strong, and this means our pipeline systems, with their unmatched market access and low transportation rates, are very much in demand and are often oversubscribed despite the current crude oil price environment. At times, it seems we cannot expand our pipeline systems quickly enough. -- CEO Mark Andrew Maki

Looking forward
According to Mr. Maki, Enbridge Energy Partners is on track to meet its goal of growing its distribution by 2%-5% annually. With $6 billion in organic growth and drop-down opportunities from Enbridge, that appears to be an attainable goal. All in all, it appears that this quarter was another solid one from Enbridge Energy Partners, and the structure of its business should ensure that it remains that way for several quarters to come.