Enbridge Takes Q4 Loss, Expects High Pipeline Utilization in 2023

Enbridge Inc. executives expressed confidence in the company’s outlook during its Feb. 10 earnings announcement despite a fourth-quarter 2022 loss of CA$1.067 billion (US$795 million). The hit was due to a one-time $2.5 billion charge in its gas transmission business.

Full-year earnings totaled $2.59 billion, a 55% decline from 2021. The quarterly loss compared to a $946 million profit in fourth-quarter 2021. For the year, the company recorded earnings per share of $1.28/share.

Enbridge attributed the fourth-quarter loss primarily to higher financing costs from rising interest rates on floating-rate debt and increased depreciation expenses on new assets that were placed into service in fourth-quarter 2021.

The company expects strong utilization of its Mainline crude oil pipeline system to propel earnings in 2023. Adjusted EBITDA is anticipated to rise to the range of $15.9 billion-$16.5 billion from $15 billion-$15.6 billion in 2022. Dividends will rise to $3.55/share from 2022’s $3.44/share.

The energy services division struggled, losing $69 million in the quarter and $417 million over the full year, compared to a $66 million profit in fourth-quarter 2021 and $313 million full-year 2021 loss.

Enbridge has no plans to give up on services, though, while acknowledging the area is highly dependent on market conditions.

“2022 was a very tough year for that business,” Vern D. Yu, CFO and executive vice president for corporate development, told analysts on the earnings call. He added that prices were backwardated for almost the entire year.

“Going forward, we’re going to see some contracts roll off at energy services,” Yu added. “Some shipments will go away and we expect the business to return to profitability this year.”

The business provides other value to Enbridge, he said.

“It gives us a good lens on basis differentials, which generally drive pipeline development,” Yu said. “It’s good to continue to have a foot in that door to understand what our customers are seeing both in natural gas and crude oil.”

The company offers a positive outlook of about $9 billion in EBITDA for its liquids pipelines segment in 2023 not only due to its Mainline system, but also because of an increased interest in the Gray Oak and Cactus II pipelines.

Gas transmission and midstream are expected to rebound strongly in 2023 with $4.3 billion in EBITDA, due to new assets in service and a Texas Eastern Transmission pipeline rate settlement. Gas distribution and storage will recover, the company said, with higher rates and additional customers.

Enbridge expects its new St. Nazaire offshore wind farm in France to push its renewable power segment to about $500 million in EBITDA. The $270 million acquisition of Tri Global Energy, a wind and solar developer, positions the company for renewable energy growth in North America but will contribute little in 2023.

Foreign exchange hedges will likely take a $450 million slice from EBITDA in the coming year.