EEP: Returning Pipeline 6A to Service

MARK REICHMAN, Madison Williams and Company (09/16/2010)
"Enbridge Energy Partners announced that repairs to Line 6A have been completed, and it is preparing to return the pipeline to service on Friday morning, September 17. . .On September 9 a leak was discovered on Line 6A, a 670K bpd pipeline that is part of the Lakehead System, which transports crude oil from the Canadian Oil Sands and the Bakken region of North Dakota to refineries in and around Chicago.

While this incident and the recent spill in Michigan represent near-term setbacks, we do not believe they will affect the partnership's ability to maintain the current distribution to unit holders. We are maintaining our Buy rating on EEP units and our 12-month price target of $63.

Our investment rating on the units of Enbridge Energy Partners, L.P. is Buy, with a 12-month price target of $63. . .Additionally, EEP units trade at 12.2x our new 2010 distributable cash flow per unit estimate of $4.30, while the current average price-to-estimated 2010 DCF per unit multiple for the pipeline/midstream MLP group is 13.7 times. Applying a multiple of 13.7x against our 2011 DCF per unit estimate of $4.78 yields a value of $65/unit. Given the partnership's relatively strong financial position, general partner support and visible growth outlook, offset somewhat by a relatively inconsistent historical pattern of distribution growth, we think it is reasonable to expect the partnership to trade relatively close to peer group averages. We note that management projects compound annual distribution growth in the range of 2% to 5% per year as measured from year-end 2009 through 2013."

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