Profits in pipeline, says Enbridge

Reporting a slight drop in fourth-quarter earnings, Enbridge said today it expects profit to rise by up to 6% this year and by up to 10% annually through 2012 as it completes a series of new pipeline projects.

Enbridge, Canada's second-largest pipeline operator, forecast operating earnings per share this year of C$1.75 to C$1.85 (US$1.48 to US$1.56), up from C$1.74 in 2006.

The company, which is spending billions on new pipelines to carry oil sands crude to US refiners, also said it expects earnings per share to rise by 8% to10% on average over the next five years as it completes new projects.

"We're making the major capital expenditures this year and next year on these projects," Pat Daniel, Enbridge's chief executive, said on a conference call. "We'll see significant benefit coming from that kicking in on the latter part of that five-year horizon."

Enbridge plans to spend about C$2 billion (1.69 billion) this year as it starts construction of the 450,000-barrel-per-day Alberta Clipper pipeline, a C$300 million expansion of an Alberta pipeline and its Southern Lights line, that will ship ultra-light oils from the US Midwest for blending with heavy oil from the oil sands.

Enbridge's pipelines now ship about a million barrels of Canadian oil a day to the US and its announced projects will boost that by 50%

With production from the oil sands forecast to triple to about 3 million barrels a day by 2015, the company and its rivals are proposing a brace of new lines to carry the crude to US refiners.

"There's a tremendous amount of growth opportunities...arising from the oil sands," Andrew Kuske, an analyst with UBS Securities, told Reuters. "The increased production needs to find a transportation route."

Kuske said he expects Enbridge's profit growth will be "muted" until 2008, when some of the new projects are completed.

The company's forecast came as it reported a slight drop in fourth-quarter earnings as warmer-than-usual weather and rising costs hampered profit at its gas-distribution unit.

Enbridge said it earned C$171 million, or 50 Canadian cents a share, down from C$174 million, or 52 Canadian cents, in the fourth quarter of 2005.

The company said adjusted operating profit for the quarter rose 5.5% from the fourth quarter of 2005 to C$172 million, or 50 Canadian cents a share. That slightly lagged the consensus profit forecast of 51 Canadian cents a share, from eight analysts polled by Reuters Estimates.

Revenue for the quarter rose 4.4% to C$2.8 billion.

Enbridge shares fell 25 Canadian cents to C$38.38 at midday today on the Toronto Stock Exchange.

Enbridge's full-year profit rose 11% to C$615.4 million, or C$1.81 a share. Adjusted earnings from operations climbed 10% to C$592.9 million, or C$1.74.