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Enbridge profit rises but results miss forecasts

Pipelines feed crude oil into in the tank farm at the Enbridge Pipelines oil terminal facility in Hardisty, Alta

Larry MacDougal/Larry MacDougal/CP

Pipeline and natural gas company Enbridge Inc. fourth quarter net earnings grew slightly, but fell short of analysts' expectations.

The Calgary-based company said Friday earnings were $335-million, or 44 cents per share, in the fourth quarter, compared to $326-million, or 44 cents per share, in the year-earlier.

Revenues grew to $5.4-billion from $4.1-billion in the fourth-quarter of 2010 as the company shipped a greater volume across its pipelines.

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Adjusted fourth-quarter earnings were $275-million or 37 cents per share.

Analysts polled by Thomson Reuters were on average expecting earnings of 39 cents per share and revenue of $4.4-billion.

The company increased its 2012 quarterly dividends by 15 per cent to 28 cents per share in December.

Enbridge said the fourth quarter results were hit by reduced earnings from gas distribution due to warmer than normal weather and a $29-million charge related to insurance recoveries.

Results also included a $98-million in income taxes on an intercompany sale.

Shares in the company fell 4 per cent or $1.60 to $37.60 in Friday trading on the Toronto Stock Exchange after the disappointing earnings report.

Pierre Lacroix, an analyst at Desjardins Securities said the earnings fell short of his estimate of 40 cents per share.

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"The difference between our estimate and ENB's result was largely due to weaker adjusted earnings from the company's Canadian Mainline division driven by a seasonal increase in operating costs under the pipeline's new Competitive Tolling Settlement, in place since July 2011," he said.

Full year adjusted earnings were up 11 per cent to $1.48 per share. Enbridge provided guidance for adjusted earnings of between $1.58 to $1.74 per share in 2012.

"2011 was an excellent year for Enbridge with results reaching the top end of our adjusted earnings per share guidance, and a total return to our shareholders of 40 per cent," said president and CEO Patrick Daniel.

"Moreover, we remain confident that Enbridge can achieve an average annual growth rate in adjusted earnings per share of 10 per cent through 2015, based on conservative assumptions for mainline throughput and future growth investment."

During the fourth quarter, Enbridge acquired a 50 per cent interest in the Seaway Crude Oil Pipeline and said it would go ahead with the $1.9-billion (U.S) Flanagan South Pipeline component of its Gulf Coast Access initiative.

"Enbridge's Gulf Coast Access initiative offers a near-term solution for shippers in western Canada and the Bakken to access the Texas Gulf Coast through the cost-effective and efficient use of existing facilities and rights-of-way," said Mr. Daniel.

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"Interest from shippers is strong and we anticipate providing additional information on capacity of the project in coming weeks."

The company also entered the Canadian midstream natural gas sector during the quarter, securing a 71 per cent interest in the development of the Cabin Gas Plant in northeastern British Columbia.

"Our investment in Cabin is a substantial initial step in the execution of our strategy to establish a strong position in the Canadian midstream business, focused on growing unconventional gas production in B.C. and Alberta and underpinned by low-risk contractual frameworks," said Daniel.

Enbridge plans to build twin pipelines connecting Alberta to the West Coast — one that would carry oilsands crude westward for export, and one that would bring imported condensates inland for use in the oilsands.

The goal of the $5.5-billion Northern Gateway project is to diversify Canada's customer base for crude exports, which currently comprises only the United States. Northern Gateway would enable Asian countries to buy Canadian crude, ensuring the product gets a better price.

The project faces steep hurdles, however. Aboriginal groups, environmentalists and others are among the many critics to voice concern over what a spill on the pipeline, or from a tanker on the West Coast, could have on northern B.C. ecosystems.

Enbridge says the pipeline will bring jobs and economic development to northern B.C. communities. But many of those groups say it's simply not worth it to endanger their way of life.

Community hearings into the proposal are underway, with thousands of people registered to speak.

The Joint Review Panel had been expected make a recommendation to the federal cabinet on the pipeline by the end of 2012, but a decision is now expected a year later due to the sheer volume of comments it must hear.

Enbridge and its partner Enterprise Products Partners have another market-expanding project in the works to bring landlocked crude to refineries along the Texas coast.

They're planning to reverse the flow of the Seaway pipeline, which currently brings oil imported into the Gulf Coast to a storage hub at Cushing, Okla.

A supply glut at Cushing, caused by ever-increasing production in the oilsands and in U.S. fields, has been eroding the value of North American crude. So draining that oil to refineries along the coast would boost the bottom line of producers.

It's likely the Seaway pipeline will be built sooner than rival pipeline company TransCanada Corp.'s proposed Keystone XL pipeline, which would connect Alberta crude to Texas refineries.

In addition to its pipeline business, Enbridge is also a major distributor of natural gas in Ontario, and a growing producer of green energy.

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