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Enbridge Energy Partners Expects Lower Earnings in 2017

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Jan. 30 2017, Updated 4:41 p.m. ET

2017 guidance

Enbridge Energy Partners (EEP) issued its financial guidance for 2017 on January 27, 2017. The company expects 2017 adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) to be $1.7 billion–$1.8 billion. That’s lower than its 2016 estimated adjusted EBITDA of $1.8 billion–$1.9 billion.

EEP expects 2017 DCF (distributable cash flow) to be $750.0 million–$800.0 million. That’s lower than estimated DCF of $860.0 million–$920.0 million for 2016.

The above chart shows the items contributing to the fall in EEP’s 2017 DCF. EEP stock fell 18.0% on Friday, January 27, 2017, after the announcement.

Lower-than-expected EBITDA and DCF for 2017 reflect more weakening for EEP’s natural gas gathering and processing business due to lower realized commodity prices and volume flows. A reduction in drilling activity in the Bakken region is also expected to negatively impact the company’s earnings.

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Possible distribution cut?

Enbridge Energy Partners mentioned in a related press release that under its ongoing strategic review, the company is considering “the sustainability of EEP’s current level of distributions.”

Mark Maki, president of EEP, said, “EEP’s current distribution level was established at a time when a significant portion of the distribution was supported by cash flow from the natural gas business. Despite significant progress on the cost structure, our natural gas gathering and processing business has been impacted by a continued cyclical downturn. Therefore, we are taking necessary actions to support the Partnership’s near-term financial position and evaluate further strengthening measures through our strategic review.”

EEP announced a distribution of $0.58 per share for 4Q16, which is unchanged from the previous quarter.

In the next part, we’ll take a look at the company’s ongoing strategic review in light of Enbridge’s (ENB) acquisition of Spectra Energy (SE).

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