Energy Partners, L.P. (NYSE: EEP)
Enbridge Energy Partners, L.P. (NYSE: EEP) (EEP or the Partnership) today reported first quarter 2017 adjusted EBITDA and DCF of $414.1 million and $197.7 million, respectively.
First quarter results were in-line with expectations and the 2017 financial outlook provided on January 27, 2017. Lakehead system deliveries reached a record level of 2.748 million barrels per day during the quarter. Higher volumes on the Mainline partially offset continued weakness in the natural gas business and lower average transportation rates and volumes on the North Dakota system.
On April 28, the Partnership announced the conclusion of its strategic review and several comprehensive actions to strengthen the Partnership's financial position and outlook. The actions taken together with its general partner, Enbridge Energy Company, Inc. (EECI or the General Partner), a subsidiary of Enbridge Inc. (NYSE: ENB) (Enbridge), along with the actions taken on January 27 will position the Partnership as a pure-play, liquids pipeline MLP with a low-risk commercial profile, stable cash flows, a strong balance sheet, healthy distribution coverage, visible growth and very limited external capital needs.
"We believe these restructuring actions re-establish EEP with an attractive and sustainable risk-return value proposition," said Mark Maki, President for the Partnership. "EEP will be positioned as a pure-play liquids pipeline MLP with one of the lowest risk commercial profiles in the industry, generating stable and predictable cash flows over the long term, irrespective of market conditions. Our first quarter and second quarter mark a transition of the Partnership to the value proposition envisioned in our strategic review. We have executed upon the majority of these actions and expect to complete the balance in the second quarter."
Based on the restructuring actions announced on April 28, 2017, the Partnership previously provided pro forma guidance metrics, assuming the restructuring actions were effective January 1, 2017, of:
First Quarter 2017 Performance Overview
Adjusted net income and adjusted EBITDA for the three months ended March 31, 2017, as reported above, eliminate the effect of: (a) non-cash, mark-to-market net gains and losses; (b) asset impairment; and other adjustments. Refer to the Non-GAAP Reconciliations section below for additional details.
Net income for the first quarter of 2017 decreased $14.6 million over the same period from the prior year as a result of lower operating results in the Liquids and Natural Gas segments, partially offset by an increase to net income from the Partnership's non-cash mark-to-market derivative transactions. Adjusted net income of $68.5 million for the first quarter of 2017 was $45.3 million lower than the same period from the prior year. Lower earnings in the liquids segment were predominately due to a decrease in North Dakota system deliveries and rates and an increase in operating and administrative costs. North Dakota rates decreased due to the expiration of two expansion surcharges on the North Dakota system. An increased operating loss in the Partnership's natural gas segment was primarily the result of lower volumes and commodity prices.
During the first quarter, the Partnership attributed approximately $22.5 million of earnings to its outstanding Series 1 Preferred units. This amount is deducted from net income to arrive at the amount of net income attributable to the general and limited partners. Preferred distributions are accrued at an annual rate of 7.5 percent. The Preferred units were redeemed in the second quarter as a result of actions resulting from the Partnership's strategic review.
First quarter operating results for the Liquids segment decreased $30.2 million to $271.2 million over the comparable period in 2016. Lower operating results were primarily due to lower average rates and weaker short-haul transportation volumes destined for the Berthold rail loading facility on the North Dakota system. North Dakota rates decreased due to the expiration of the Phase 5 looping and Phase 6 surcharges, resulting in an $8.9 million decrease in operating revenue period over period. Volumes on the Partnership's Lakehead system increased in 2017, when compared to the same period in 2016, from assets placed into service in 2016 including portions of the Eastern Access, Mainline Expansion projects, and other projects. Higher revenue associated with additional projects placed into service in 2016 was offset by lower tolls and the impact of a depreciation study which came into effect in the fourth quarter of 2016. Operating and administrative costs were higher period over period due to $9.7 million in environmental remediation costs associated with the Ozark Pipeline System release on January 14, 2017.
First quarter adjusted operating income for the Liquids segment decreased $33.2 million to $277.3 million over the comparable period in 2016 due to the same factors described above.
First quarter operating loss for the Natural Gas segment decreased $12.0 million over the comparable period in 2016. The decrease in operating loss was primarily the result of an increase in non-cash mark-to-market gains in the current period when compared to the same period in 2016 in the amount of $33.0 million. Operating losses were also decreased by lower operating expenses resulting from cost reduction efforts. The gas pipelines and processing business continues to be impacted by low natural gas and NGL prices. System volumes, and a reduction in the value we received for the Partnership's natural gas liquids due to lower hedged prices when compared to the same period in 2016, are impacting 2017 results.
First quarter adjusted operating results for the Natural Gas segment decreased $20.2 million over the comparable period in 2016. The decrease in segment adjusted operating results was predominantly attributable to a reduction in the value the Partnership receives for its natural gas liquids due to lower hedged prices and lower natural gas and NGL system volumes. The decrease in adjusted segment operating results was partially offset by reductions in operating and administrative expenses from enacted cost reduction measures.
Conference Call Details
The Partnership will host a joint conference call and webcast at 9:00 a.m. Eastern Time on May 11, 2017, with Enbridge Inc. (TSX: ENB) (NYSE: ENB), Enbridge Income Fund Holdings Inc. (TSX: ENF), and Spectra Energy Partners, LP (NYSE: SEP) to review first quarter results. Analysts, members of the media and other interested parties can access the call toll-free at 1-866-215-5508 or within and outside North America at 1-514-841-2157 using the access code of 44798051#. The call will be audio webcast live over the internet and may be accessed on the Partnership's website under Events and Presentations or directly at http://edge.media-server.com/m/p/9gxn6d2m.
A webcast replay will be available approximately two hours after the conclusion of the event and a transcript will be posted to the website within 24 hours. The replay will be available at toll-free 1-888-843-7419 or within and outside North America at 1-630-652-3042 (access code 44798051#) for seven days after the call.
About Enbridge Energy Partners, L.P.
Enbridge Energy Partners, L.P. owns and operates a diversified portfolio of crude oil transportation systems in the United States. Its principal crude oil system is the largest pipeline transporter of growing oil production from western Canada and the North Dakota Bakken formation. The system's deliveries to refining centers and connected carriers in the United States account for approximately 23 percent of total U.S. oil imports.
About Enbridge Energy Management, L.L.C.
Enbridge Energy Management, L.L.C. manages the business and affairs of the Partnership, and its sole asset is an approximate 19 percent limited partner interest in the Partnership. Enbridge Energy Company, Inc., an indirect wholly owned subsidiary of Enbridge Inc. of Calgary, Alberta, Canada (NYSE: ENB) (TSX: ENB) is the general partner of the Partnership and holds an approximate 35 percent interest in the Partnership. Enbridge Management is the delegate of the general partner of the Partnership.
SOURCE: Enbridge Energy Partners
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