Betting BIG on American energy!Well, after going through a pile of numbers & figures and then digesting the entire transaction between Dominion/Endbridge, i came to an enlightening conclusion here. We really only need to focus on JUST ONE side of the equation, because THAT'S the only thing that really counts and mattters for folks on here. So unless you're a Dominion s/h and looking for reasons or justifications of WHY they sold these assets, well you're "you know what" of luck, as we'll JUST be looking at Enbridge's reasons for buying these assets and the motivation behind that decision. As well as IF it was a good one....or not.
So working on the premise that we don't care why Dominion sold, whether it was for some financial issue like liquidity troubles, balance sheet issues or maybe just a simple fact of slimming down or pivoting operations, that fact remains it really doesn't matter from our perspective IF Dominion was forced to or not.......to sell these assets. On the other hand, Enbridge was not forced to buy....soooo...let's take a look at the reasons WHY Enbridge made this "stunning" move.
Assuming that this wasn't only an opportunistic "gift" that JUST fell on their lap and that Enbridge was looking to expand their operations for some time, then we have to ask ourselves WHY did they dump that HUGE $15Bus investment in the US and not in Canada? Was it for a lack of "reasonable & viable" opportunties in Canada? Was there absolutely NO interest in expanding further in Canada.......at this time? At this point in time we JUST don't know the REAL reasons why, and regardless for what reasons they, meaning Enbrdige's mgmt/bod had, they decided this "Dominion asset divestiture" opportunity was just too good to pass up.
But IF we were to put the financial opportunity aside & speculate somewhat, and try to understand WHY they did this, some might find the end results a little worrisome & disturbing. So let me give you MY TAKE on the WHY. First, a little disclaimer here, i'm not an Enbridge s/h at this time so this is an unbiased opinion with no ulterior motives either way. Secondly, you don't wake up one morning and decide to dump a ~$20Bcdn investment out of the blue for no apparent reason, without doing some major risk assessments prior, some calculated pro'/cons along with some deep thought on the implications of such a move. It just doesn't happen with companies like Enbridge with major investments like that, who have to think over the VERY long term on such things as not only profitability but also survivability.
So WHY did Enbridge invest $20B into America and not Canada? Putting the opportunistic element aside being presented? Well, i surmise that if Enbridge's mgmt was in the same line of thought as Baytex & Ovintiv, then it's quite uderstanable that they would follow the same indentical path. And what is that path? Simple, they see more "viable", "survivable" & profitable options in the US than in Canada over the next 10 years. And imho, this isn't only in terms of assets but in a political statement being made as well. And i'm betting all three of these compamies, are they themselves betting "BIG" that Sleep Senile Joe & his Democratics cohorts have a better chance of being defeated by energy friendly Conservatives than that Turnip Justine Trudope & his merry band of Sea Pirates in Canada.
So with part of the WHY being fleshed out here, was this a good deal for Enbridge? Just strcitly on the numbers? Honestly, that's really difficult to tell or predcit at this point in time. Because for all intents & purposes this is a BIG BET on the future or some possible future outcomes. But if i was forced to assess this now, in this extremely low pricing NG state and very hostile, unfriendly environment for energy/fossil fuel operators, i would say that right now.......ENB got the short end of the stick. But i don't think that ENB made this decision, lightly, for today or the next 6 months, i think they made it with a carefull LONG TERM strategic assessment and betting big on the future of NG along with some political outcomes.
As far as the deal itself goes, Enbridge paying ~$10B & assuming another ~$5B in debt, whether a good deal or not will all depend WHERE the energy pricing & political chips fall. Right now, it doesn't look too good because Enbridge is already HEAVILY indebted by about ~$60B PRIOR to this deal, so adding another $5B in debt doesn't help their BS at all & only makes it worse going forward. Especially in this rising interest rate environment, where there's a desperate & urgent need to refinance and where lenders are hesitant & skeptical to work with fossil fuel operators, espeically Canadian ones. But like i said, Enbride isn't looking at only TODAY and its CURRENT situation, its looking at the energy environment for the next 10 years and securing its future.
Aside from all the numbers &figures, one thing is certain here.......it's a BIG BET by ENB on TWO major fronts. And coming this November 2024, we will find out if one of those bets pays off or not. Personally, i see both Trudope The Turnip & Sleep Senile Joe BOTH being re-elected into office, easily... for another term. But that's a discussion for another time.......8).
GLTA