Oil Sands Truth: Shut Down the Tar Sands

"Enbridge in race to move oil south to the U.S. Gulf Coast"

Enbridge in race to move oil south to the U.S. Gulf Coast

Enbridge Inc. will likely take the acquisition route as opposed to building from greenfield in its race with other Canadian pipeliners planning ways to move Alberta crude south to the U.S. Gulf Coast (USGC), according to Desjardins analyst Daniel Shteyn.

"We view M&A as the most likely, given cost and speed to market, and believe Enbridge will be the ultimate winner in this particular race." he said in a research note.

In particular, he said the purchase of pipeline assets between Oklahoma and USGC would mesh with the company's current pipeline "footprint."

That said, Enbridge, whose 2007 guidance of 8 to 10% EPS growth is dependent on some type of expansion, will receive stiff competition from other M&A and/or greenfield pipeline proposals, Mr. Shteyn says. For instance, he notes TransCanada Corp., who in a venture with ConocoPhilips, could potentially link its proposed Keystone pipeline to the USGC.

The USGC is an attractive destination for Alberta's oil, which traditionally has moved across the border to a hub in the Chicago area, because it has the potential to displace Venezuela's existing heavy crude supply given that country's political uncertainty and also Mexico's supply, which is currently in decline.

Mr. Shteyn reiterated his 'buy' rating for Enbridge and left his $41 price target unchanged.

David Pett

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