ENB just keeps getting better and betterI visit Stockhouse once in awhile to see if there is any useful information or insight to be found. Now that I have all the idiots who have nothing of value to contribute back on IGNORE, it doesn't take long to catch up.
I believe there are still a few real investors that drop by in case somebody has something worthwhile to contribute so I thought you might enjoy reading this.
I was checking out an April 20, 2021 article about how the Cactus II pipeline was requesting from FERC an open season on the pipeline which runs from the Permian to Corpus Christi:
https://www.goarbo.com/arview/permian-pipeline-overbuild-creates-capacity-bargains-for-shippers
When the 585,000 bpd Cactus II pipeline was built in 2018, the Permian was pumping 3.1mm bpd and it was expected that the volume would be increasing to 4mm bpd. By the time the article above was written, the pipeline capacity out of the Permian had been built up to 8mm bpd. What was FERC and the pipeline builders thinking when they allowed the massive over build? While the shippers must have loved the imbalance of supply vs demand, the pipeline builders were left shaking in their boots.
Then Covid hit and production in the Permian dropped by 2mm bpd. The pipeline operators offered up incentives to shippers to attract business. As a result, shipping fees dropped to $0.75 per barrel by April 2021.
By this point, I will have lost the intererst of the attention span deprived children on the site, but now is where the story comes together for actual ENB shareholders.
When ENB recently purchased the Moda Ingleside Energy Center from Enable Midstream for US$3 billion this year, the jewel of the deal was the port.
When you consider that the port shipped 25% of America's oil exports last year (1.5 billion bpd) and approvals for another 400mm bpd are already in place and there is plenty of land for ENB to expand even further, one has to wonder how ENB was able to steal the port for only $3 billion.
This is where the Cactus II pipeline fits into the story.
Enable Midsteam (who sold Ingleside to ENB recently) is a small LP and part of its portfolio was a 20% stake in Cactus II.
When I first looked at the ENB acquisition, I thought "why in the world would ENB pay $3 billion for an asset that only generated $18 million in income?"
As I sifted through the details of the deal, I realized that Cactus II was the throw-in to the deal that made the Ingleside such a great deal for ENB. The sale allowed Enable to use the $3 billion in proceeds to move in another direction where they could earn a much better return.
Think about the deal as if it were the Leafs giving up a first round draft pick to get rid of Patrick Marleau's bad contract. In the case of the Ingleside deal, Enable Midstream discounted a valuable asset (Ingleside) in order to get rid of its Cactus II bad deal.
The deal was a win-win for both sides.
Enable couldn't continue to build out Ingleside because it didn't have the financial strength (the partnership only raised $750 million for the Ingleside deal) or cashflow (which was being stymied by Cactus II). So, Enable sold Ingleside to ENB for a nice profit and got rid of the Cactus II cash flow killier.
ENB gets Ingleside on the cheap and has the deep pockets to further develop the site. America has recently become the largest LNG exporter in the world as the demand for LNG is exploding. American will likely grow its LNG exports as it has the two key ingredients to expand exports which are a very low cost base and it has infrastructure in place. It is literally the perfect scenario for ENB.
The ENB win doesn't mean Enable lost. Far from it. Enable simply didn't have the financial horsepower to continue developing Ingleside but the deal ended up being the perfect Vencap scenario. Enable raised $750 million fo the deal and then they did their thing before selling for a 4x profit in 4 years.
The deal also provided ENB with a huge growth opportunity which ENB was able to seize upon because it is a cash generating monster that had the cash available when banks had turned their backs on the oil industry in America.
Spectra was a huge win that took the market a couple of years to understand.
Ingleside is going to be a big win that the market will eventually wake up to.
Going forward, ENB is quietly building out its internal network of pipes to move a lot more Alberta oil to the Gulf Coast refineries. The market will probably take 5 years to figure that one out.
ENB just keeps better and better. The fact that Wall St. is ignoring ENB is just fine with me.