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Dwindling Revenues May Force Enbridge To Sell Its U.S. NatGas Assets

Suffering from a 51-percent decline in revenues in the first quarter of this year, reports are emerging that Canadian Enbridge Energy Partners LP may seek to divest itself of its U.S. natural gas business.

The Canadian pipeline giant’s main natural gas holdings are in Midcoast Energy Partners and Midcoast Operating LP—which operate in Texas and Oklahoma, have seen a halving of revenues so far this year largely because of weak natural gas prices.

For Enbridge, it’s about finding an alternative to these floundering investments and to replace them with something more strategic. This could include further sales of natural gas assets or reductions in capital spending on natural gas at a time when the commodity is from its lowest level of prices on some 20 years thanks to the shale boom.

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Enbridge has reported a revenue decline of $8.7 million compared to the first quarter of 2015—and it’s put 15 percent less natural gas through its systems at the same time. Natural gas producers where Enbridge operates are slowing drilling.

Total revenue for the first quarter was $1.06 billion--$431.9 million of which was from natural gas, and natural gas operating losses continue to mount. So far, this segment saw operating losses increase in the first quarter by nearly $4 million.

At the same time, Enbridge recorded gains in its liquids business, which saw operating profits jump to over $301 million, up from $270 million in the same quarter last year.

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No final decisions have been made yet, though. Enbridge is waiting for the right time to decide what to do about the flailing natural gas business.

Enbridge’s three key subsidiaries include Enbridge Energy Partners (EEP-NYSE), Enbridge Income Fund (ENF-TSX), and Enbridge Energy Management LLC (EEQ-NYSE). Late last year, Enbridge said it was considering rolling more assets into these subsidiaries, which would give the subsidiaries more direct control equity and debt to fund capital expansion.

By James Burgess of Oilprice.com

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