21 May 2020 by jbchevrel
Since rolling out its credit-friendly strategic plan back in late 2017, Enbridge (ENB) has completed $8B+ of divestitures, reduced leverage to its 4.5–5x range and simplified its corporate structure meaningfully. The company’s diversified energy infrastructure model generates relatively stable cash flow. ENB has widened from 55 to 355. It has now almost completely retraced (100 area). Earlier this month, ENB reported adjusted EBITDA of C$3,763M vs C$3,769M in Q1-19. Higher earnings at Liquids Pipelines and Gas Transmission & Midstream offset lower earnings at Gas Distribution & Storage and Energy Services. During Q1-20, Enbridge generated a gross FCF shortfall of C$432M, after CapEx of C$1,234M and Dividends & Distr of C$1,813M. Two ENB maturities were repaid (C$500M, US$700M) & $100MM at Westcoast. During Q1-20, ENB raised capital via a US$750M 2yr FRN and EGI issued $1.2B in a long dual-tranche (10s & 30s). Enbridge also established three new non-revolving credit facilities totaling US$1.5B and a $1.7B 1y revolver (upsized to $3B in early April). ENB currently has ~$14B of available liquidity. Guidance for 2020 debt-to-EBITDA is still 4.5–5x target range. The last few days have seen money rushing back into oil, with all crude benchmarks climbing. Front North Sea Brent is trading in high 30s. The super-contango curve has vanished, and now Jun/Jul term structure on the future curve is almost flat. While this strength does have a fundamental backbone in improving supply-demand fundamentals, the rate of increase looks big vs it. Vaccine news and QE help too.