HOUSTON - Enbridge Inc. (TSX: NYSE:ENB) (NYSE: ENB) announced plans to construct and operate new oil and natural gas pipelines in the U.S. Gulf of Mexico, supporting BP (NYSE:BP) Exploration & Production Company's Kaskida development. The project aligns with Enbridge's strategy of providing energy infrastructure and aims to enhance its presence in the Gulf region.
The Canyon Oil Pipeline System, designed to transport 200,000 barrels of crude oil per day, will comprise 24" and 26" pipes stretching from the Keathley Canyon area to the Green Canyon 19 platform, managed by Shell (LON:SHEL) Pipeline Company LP. This system will facilitate the transfer of crude oil to the Louisiana market. Additionally, the Canyon Gathering System, a 12" pipeline with a 125 million cubic feet per day capacity, will connect to Enbridge's existing Magnolia Gas Gathering Pipeline and ultimately to the Garden Banks Gas Pipeline, regulated by the Federal Energy Regulatory Commission (FERC).
These projects are supported by long-term contracts that reflect Enbridge's preference for low-risk investments and are expected to deliver utility-like returns. The contracts also provide options for BP to integrate future production from its emerging Paleogene portfolio into the new infrastructure. Both pipelines are being engineered to accommodate additional connections from nearby discoveries.
The design and procurement phase for the pipelines will commence in early 2025, with a projected operational date in 2029. The total investment for the construction of the pipelines is estimated at approximately $700 million.
Cynthia Hansen, Enbridge's EVP & President of Gas Transmission and Midstream, expressed enthusiasm about reinforcing the partnership with BP and contributing to the Kaskida development. She highlighted the strategic importance of the pipelines for meeting customer needs in the Gulf of Mexico and expanding Enbridge's U.S. Gulf Coast operations. The agreement is anticipated to generate stable cash flow and present further growth opportunities.
Enbridge is a North American energy infrastructure company headquartered in Calgary, Alberta, with a focus on natural gas, oil, renewable power, and emerging energy technologies such as hydrogen and carbon capture and storage. The company's shares are traded on the Toronto and New York stock exchanges under the symbol ENB.
This announcement includes forward-looking statements regarding the pipelines' capacities, costs, and potential future connections. These statements are subject to risks and uncertainties that could affect the actual outcomes, including project execution and regulatory approvals. The information presented is based on a press release statement from Enbridge Inc.
In other recent news, Enbridge Inc. has made significant strides in its North American operations. The energy transportation company has finalized a series of acquisitions from Dominion Energy (NYSE:D), Inc., which includes several assets and companies such as Dominion Energy Questar Corporation, Questar Gas Company, and Public Service Company of North Carolina, Incorporated. This expansion is expected to strengthen Enbridge's presence in the U.S. energy market.
The company has also adjusted its financial outlook, raising its 2024 EBITDA forecast to $17.7 billion to $18.3 billion, following strong Q2 results. This adjustment is largely attributed to the contributions from recent U.S. Gas Utilities acquisitions. Despite these positive developments, Jefferies has downgraded Enbridge's stock from "Buy" to "Hold," awaiting further catalysts to significantly alter the stock's valuation.
In addition to these financial developments, Enbridge, like many other companies across various sectors in the United States and Canada, is reducing its workforce amid economic uncertainty. The company has also been impacted by Tropical Storm Francine, leading to the evacuation of employees from Gulf platforms and the shutdown of production at several sites. These are the most recent developments in Enbridge's business landscape.
InvestingPro Insights
Enbridge's latest pipeline project in the Gulf of Mexico aligns well with its financial profile and market position. According to InvestingPro data, Enbridge boasts a substantial market capitalization of $89.31 billion, underscoring its significant presence in the energy infrastructure sector. This new investment of approximately $700 million represents a strategic allocation of capital for the company.
InvestingPro Tips reveal that Enbridge has raised its dividend for 21 consecutive years, demonstrating a strong commitment to shareholder returns. This track record of dividend growth is particularly relevant in the context of the company's latest infrastructure project, which is expected to generate stable cash flows. The current dividend yield stands at an attractive 6.51%, which may appeal to income-focused investors looking at the energy sector.
Another InvestingPro Tip highlights that Enbridge is trading at a low P/E ratio relative to its near-term earnings growth, with a PEG ratio of 0.55. This suggests that the stock may be undervalued considering its growth prospects, which could be further enhanced by projects like the new Gulf of Mexico pipelines.
For investors seeking more insights, InvestingPro offers additional tips and analysis on Enbridge, with 11 more tips available on the platform to help inform investment decisions in this dynamic energy infrastructure company.
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