Enbridge reports stronger than feared Q2 Mainline oil transport volumes

By Canadian Press

CALGARY — The main export system for Western Canada’s oil production is recovering after volumes fell by less than feared amid the COVID-19 economic slowdown in the second quarter, pipeline company Enbridge Inc. reported Wednesday.

The system which accounts for about 70 per cent of Canadian oil exports into the United States moved 2.44 million barrels per day in the three months ended June 30, a decline of about 400,000 bpd compared with the first quarter tally of 2.84 million bpd, the company reported.

The result was at the low end of a forecast shortfall of between 400,000 and 600,000 bpd, said CEO Al Monaco on a conference call.

He added that while the company is encouraged by a rise in North American crude demand from about 15 million bpd in April to 18 million bpd in June, it is wary of the impact of a possible pandemic second wave.

“Overall, the pace of recovery was a little better than we thought in Q2 but, with the rise in infection rates that we’re seeing today, we’re cautious about the timing of a full return,” Monaco said.

“Since April, North American demand came back by about three million (barrels) per day but we see a more gradual pace of recovery from here.”

The Mainline is expected to be underutilized by between 200,000 and 400,000 bpd in the third quarter and between 100,000 and 300,000 bpd in the fourth quarter before returning to full utilization in early 2021.

The Calgary-based company reported second quarter net income of $1.65 billion, down from $1.74 billion in the year-earlier period, thanks to a 40 per cent drop in revenues to nearly $8 billion from $13.3 billion.

Revenue attributed to commodity sales fell to $2.9 billion from $8.4 billion as oil prices plunged due to lower demand because of the pandemic and higher production by OPEC and other international producers.

Adjusted profit came in at $1.13 billion or 56 cents per share, compared with $1.35 billion or 67 cents per share in the second quarter of 2019.

Enbridge was expected to report 55 cents per share in adjusted profits, according to financial markets data firm Refinitiv.

In a report, Stifel FirstEnergy analyst Ian Gillies said Enbridge beat his adjusted income forecast mainly due to stronger U.S. natural gas transmission and distribution earnings.

The company had few updates concerning its ongoing court and regulatory pipeline battles in the United States.

It’s a partner in the three-year-old Dakota Access Pipeline, which a judge ordered shut down last month after finding a crucial federal permit fell short of National Environmental Policy Act requirements. The decision has been temporarily stayed.

Enbridge will be able to mitigate the loss of revenue if the pipeline is closed by rerouting some North Dakota oil volumes to other parts of its system, said liquids pipelines president Vern Yu on the call.

Permits needed for the company’s Line 3 replacement project in Minnesota are being delayed until at least November and some capital expenses expected to be incurred this year have been moved to 2021, said chief financial officer Colin Gruending on the call.

Meanwhile, the company hopes to restore the east leg of its Line 5 pipeline running through a Great Lakes channel within weeks if it is able to demonstrate it is safe to operate after an incident involving an anchor support on the underwater conduit.

Last month, Enbridge confirmed 800 employees had voluntarily left the company as part of program announced in May to reduce 2020 costs by $300 million through measures including salary cuts and voluntary staff reductions.

It reported Wednesday $268 million ($200 million after tax) in employee severance, transition and transformation costs during the second quarter.

Enbridge’s shares gained $1.07 or 2.5 per cent at $43.29 in midday trading on the Toronto Stock Exchange.

This report by The Canadian Press was first published July 29, 2020.

Companies in this story: (TSX:ENB)

Dan Healing, The Canadian Press

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