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It wasn't that long ago that Enbridge (NYSE: ENB) planned to be a dividend growth engine for its investors. After acquiring Spectra Energy and all its subsidiary partnerships, the combined company had an audacious spending plan and an immense backlog of projects. This past quarter, though, that plan was tweaked slightly as management is rethinking some of its capital allocation priorities.
Here's a brief rundown of Enbridge's most recent quarterly report and how management is slightly shifting its strategy.
Enbridge earnings: The raw numbers
| Metric | Q4 2017 | Q3 2017 | Q4 2016 |
|---|---|---|---|
| Revenue | CA$12.9 billion | CA$9.2 billion | CA$9.3 billion |
| Earnings attributable to common shareholders | CA$207 million | CA$765 million | CA$365 million |
| EPS | CA$0.12 | CA$0.47 | CA$0.39 |
| Distributable cash flow* | CA$1.74 billion | CA$1.34 billion | CA$879 million |
Data source: Enbridge earnings release. *Enbridge's prior earnings releases labeled this as available cash flow from operations. CA$1=$0.80 in U.S. dollars as of 2/18/18.
Don't freak out: Enbridge's fourth-quarter result wasn't less than a third of its prior quarter. Much of that change relates to the updated U.S. tax code. According to management, the company took a CA$2.0 billion charge to write down about CA$2.0 billion in deferred tax liabilities it had on the balance sheet. This is a non-cash charge that should have no bearing on the company's results in future quarters.
On top of the changes related to the tax code, Enbridge made several changes to the way it reports its earnings. Instead of reporting its business segments on an earnings basis, the company now reports segment data on an adjusted EBITDA basis. As a result, it's hard to determine how this past quarter stacked up against the prior one. Also, since the company had not yet closed its merger with Spectra Energy this time last year, the comparison between the two doesn't give an accurate reflection of how the business is doing.
Image source: Getty Images
What happened with Enbridge this quarter?
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Aside from some regulatory hurdles in Minnesota, the Line 3 replacement program continues to progress on schedule. It has completed work in Wisconsin and South Dakota and has replaced more than 400 kilometers of pipe in Canada. Enbridge expects a vote from the Minnesota regulatory commission in June and to have the project complete by the second half of 2019.
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The company met its goal of bringing CA$12 billion in projects into service in 2017. According to its construction schedule, it will bring another CA$7 billion in projects on line in 2018.
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Management also delivered its new strategic plan for 2018-2020. The three priorities from this new strategy will be to de-lever the balance sheet to a target debt-to-EBITDA ratio of 5.0, sell non-core assets, and make some corporate changes to streamline the business.
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It intends to achieve this goal and still deliver distribution growth in excess of 10% annually through 2020.