Enbridge Inc.’s chief executive touted the Canadian company’s efforts to further expand in the United States – on the Gulf Coast and elsewhere – as part of a bid to capitalize on expected long-term natural gas demand in North America and overseas.
The Calgary, AB-based company, already a major force in Canadian and American energy, said a string of previously announced agreements with Dominion Energy Inc. would bolster its gas utility operations throughout several U.S. states. Enbridge is buying East Ohio Gas Co., Public Service Co. of North Carolina Inc., as well as Questar Gas Co. and its Wexpro Co. affiliate.
In all, the Dominion units on the sale block serve 3 million customers across 78,000 miles of pipelines with customers in Idaho, North Carolina, Ohio, Utah and Wyoming. Enbridge would become the largest gas utility business by volume in North America should the deals -- valued at $14 billion, including $4.6 billion of assumed debt -- close in 2024 on a staggered basis as planned. The transactions would boost Enbridge’s Lower 48 gas utility customer base to 7 million.
“We have approximately 75% of the required financing in place, significantly de-risking the funding plan. The remaining financing needs are very manageable,” Enbridge CEO Greg Ebel said on the company’s earnings call Friday (Nov. 3).
More acquisitions could follow, according to Ebel, but he cautioned against expectations of anything along the lines of the blockbuster deals recently announced by majors ExxonMobil and Chevron Corp. Last month, ExxonMobil agreed to pay nearly $60 billion to acquire Dallas-based Pioneer Natural Resources Co., and Chevron Corp. followed with a $53 billion deal to buy New York City-based Hess Corp.
“I don’t see us doing any major M&A here as we bring in the three utilities in the United States and make sure that they’re fully integrated with the system,” Ebel said. “But we see a lot of stuff. And I think that’s a great opportunity for us” to pursue smaller opportunities and “for the business units to sharpen their pencils on that front.”
The latest U.S deals follow other recent expansion efforts and mergers and acquisitions activity in the Lower 48.
In the first quarter, Enbridge concluded a successful open season on the Texas Eastern Transmission system, aka Tetco, in Appalachia.
In the second quarter, it acquired the Tres Palacios Holdings LLC natural gas storage facility on the Texas coast. It serves gas-fired power plants in Texas, as well as LNG exports to global markets and pipeline exports to Mexico. In total, the facility’s three salt caverns have working gas capacity of about 35 Bcf and 11 inter- and intrastate pipeline connections.
In all, the growth moves punctuate Enbridge’s bullish long-term view of U.S. natural gas demand – both for domestic use and to feed strengthening calls for liquefied natural gas to export to Europe, Asia and elsewhere, executives said.
LNG feed gas demand from U.S. export facilities recently approached 15 Bcf/d – close to available capacity. With several new export plants on the Gulf Coast slated to open in coming years, about 24 Bcf of LNG capacity is expected online by 2032.
All of this comes as natural gas prices in the United States are low relative to 2022, when Russia’s war in Ukraine sent prices soaring. But U.S. futures and cash prices have begun to strengthen ahead of winter – and ahead of the first new Gulf Coast export facilities next year.
For example, NGI’s November Bidweek National Avg. clocked in at $3.135/MMBtu, down from the year-earlier average of $4.950 but up 85.5 cents month/month.
Ebel also noted that Enbridge on Nov. 1 completed its acquisition of a nearly 94% controlling interest in the Aitken Creek natural gas storage facility in British Columbia (BC) from FortisBC Holdings Inc. Aitken Creek has about 77 Bcf of working gas capacity, and it is connected to the BC (aka Westcoast) Pipeline, Alliance Pipeline and North Montney Mainline. Enbridge also plans to connect to the LNG Canada export terminal via the Coastal GasLink pipeline.
“This asset is well-positioned and will enhance our service offering to our customers and support our LNG export strategy in BC and in the U.S. Northeast,” Ebel said. “We’ve initiated an open season on the Algonquin pipeline, which will provide much-needed supply to New England and will help stabilize energy prices in the area.”
Additionally, Enbridge is seeing increasingly robust oil export activity at its Permian Basin Ingleside Energy Center. It also touted its Gray Oak Pipeline LLC, a conduit for crude from the Permian to the Gulf Coast.
“In the Permian region, we saw a new record for export volumes through Ingleside again this quarter, giving us further verification of and confidence in our Gulf Coast strategy,” Ebel said. “In order to support further growth in the Permian and meet our customer needs, we expect to initiate an open season on our growth Gray Oak pipeline by the end of this year and will add 2 million bbl of storage at our Ingleside terminal in 2024.”
Enbridge, which reports in Canadian currency (C$1.00/US73 cents), posted third quarter net earnings of $500 million (26 cents/share), versus earnings of $1.6 billion (63 cents) a year earlier. Distributable cash flow of $2.6 billion was up from $2.5 billion in 2Q2022.
