It's almost impossible to keep track of everything going on at Enbridge (ENB 1.68%). Between all of its operating subsidiaries, the corporate restructuring related to its merger with Spectra Energy, and its CA$31 billion capital program, there are loads of reasons to be both excited and apprehensive.
So let's dig into the company's most recent results, as well as some of the company's announcements, to see what investors can look forward to and what to be on the lookout for in the coming quarters.
Image source: Getty Images.
Enbridge's results: The raw numbers
| Metric | Q3 2017 | Q2 2017 | Q3 2016 |
|---|---|---|---|
| Revenue | $9.2 billion | $11.1 billion | $8.5 billion |
| ACFFO* | $1.34 billion | $1.32 billion | $852 million |
| Earnings attributable to common shareholders | $765 million | $919 million | ($103 million) |
| Earnings per share | $0.47 | $0.56 | ($0.11) |
Data source: Enbridge earnings release. *ACFFO= Available cash flow from operations. All figures in Canadian dollars.
One thing to keep in mind is that Enbridge's results this time last year don't include Spectra Energy, so take any year-over-year results with a great big grain of salt. Also, it's a bit challenging to compare Enbridge's sequential-quarter results because the company has some seasonal businesses, such as gas distribution. Then again, that was the whole point of the Spectra Energy acquisition. The company is large and diversified to the point that one particular business segment won't cause it to sink or swim.
Data source: Enbridge earnings release. Chart by author.
What happened with Enbridge this quarter?
- Enbridge completed construction on two short segments of its Line 3 replacement program in the quarter, and construction is more than 50% complete on large portions of the Canadian half of the pipeline system. It has hit a couple of regulatory snags on the U.S. side of the project, but management still anticipates an in-service date for the second half of 2019.
- So far in 2017, management has brought CA$9 billion worth of new projects on line, and it anticipates that CA$12 billion of new projects will be complete by the end of the year.
- The company filed an application with the Ontario Energy Board for an amalgamation of its gas distribution businesses. According to management, combining these two companies would significantly reduce costs over time.
- Management reaffirmed its goal of $3.60 to $3.90 per share of available cash flow from operations.
- This past quarter was much quieter than the prior one regarding new project announcements or acquisitions, but its investor day presentation is on Dec. 12. Don't be surprised if there are some considerable announcements then.
What management had to say
One of Enbridge's challenges right now is finding the capital necessary to fund this incredible development program. So, as part of its press release statement, CEO Al Monaco was sure to point out management's progress in finding the funds to execute this plan. Note that Monaco's remarks are in Canadian dollars.
We've had a very productive year so far. It's now been only eight months since the Spectra transaction closed, and we're pleased with our progress on integrating operations of these two large companies. We've also made good strides in strengthening and streamlining the organization with the restructuring of Enbridge Energy Partners, L.P. (EEP) and the buy-in of Midcoast Energy Partners, L.P. earlier this year. In addition, we've raised over $10 billion in the capital markets, of which $3 billion is equity or equity equivalent, and we've increased total non-core asset sales since the announcement of the merger transaction to $2.6 billion.
As we move forward, we'll continue to evaluate ways to further strengthen and streamline both our business operations and sponsored vehicle structures, reduce costs, and enhance our financial position.
10-second takeaway
So far, it looks as though the integration of Spectra Energy is getting along rather well. The company has executed several deals to simplify the overall business and to help fund its growth program. The one point of concern is that the company's debt metrics continue to creep up as it takes on more debt to finance these ambitious projects. Over time, the contributions from these new projects should help offset the additional debt costs, but some of its largest projects won't be completed until 2019. If Enbridge can continue to issue investment-grade debt, then it shouldn't be an issue. However, this is something to watch over the next couple of years.
