Q1 2022 Enbridge Inc Earnings Call
Welcome to the Enbridge incorporated first quarter 2022 financial results Conference call My.
My name is Justin and I will be your Opex for today's call.
At this time all participants are in a listen only mode.
Following the presentation, we will conduct a question and answer session for the investment community.
During the question and answer session. If you have question. Please press star one on your touch tone phone.
Please note that this conference is being recorded.
I'll now turn the call over to Jonathan Morgan Senior Vice President capital markets, Jonathan you may begin.
Thank you good morning, and welcome to the Enbridge, Inc. First quarter 2022 earnings call.
Joining me this morning are al Monaco, President and Chief Executive Officer.
Vern Yu executive Vice President and Chief Financial Officer.
Calling Grundy executive Vice President liquids pipelines.
Dr Hansen Executive Vice President gas transmission and midstream.
Michelle arrogance, senior Vice President and President gas distribution and storage and Matthew Ackman, Senior Vice President strategy power and new energy technologies.
As per usual this call will be webcast and I encourage those listening on the phone follow along with the supporting slides will.
We will try to keep the call to roughly one hour and in order to answer as many questions as possible, we will be limiting your questions to one plus a single follow up as necessary.
We'll be prioritizing questions from the investment community. So if you are a member of the media. Please direct your inquiries.
To our communications team, who will be happy to respond.
As always our Investor relations team will be available following the call for any follow up questions.
And now onto slide two where I'll remind you that we will be referring to forward looking information on today's presentation and Q&A.
By its nature of this information contains forecasts assumptions and expectations about future outcomes, which are subject to the risks and uncertainties outlined here and discussed more fully in our public disclosure filings, we'll also be referring to non-GAAP measures as summarized below.
With that I'll turn it over to Al Monaco.
Good morning, everyone.
Well the chart what you see here is the first of eight turbines being installed at our 480 megawatt Saint <unk> wind project off the West coast of France.
Just to give you a sense of the magnitude of this infrastructure that powers, our 170 meters in height and.
And each blade is about the same as the wingspan of an Airbus three eight so a pretty exciting time in our renewables business and more on that later.
First of all recent events are very troubled and.
And we're all very concerned for the people in Ukraine.
Many of our staff have connections to the region and we're supporting them.
What's happening is also where do you think a lot about global energy markets.
So I'll start off with how we're thinking about that followed by our business update and Bryan will cover our financial results and outlook.
Before that this slide captures our Q1 highlights it's been a good start to the year, all four businesses performed well operating at or near capacity.
That translated into strong Q1 numbers and we're on track to achieve 22 guidance the.
The balance sheets in good shape, and both S&P and Fitch reaffirmed our triple B high ratings.
We've got 10 billion of projects in execution with 4 billion slated for service this year.
So far in 'twenty two we've added another 1 billion to our project backlog that will support post 'twenty for growth.
We'll update you on two carbon capture opportunities, we're very excited about.
More broadly we are seeing a pickup in customer infrastructure, especially LNG export.
Recall, there is $5 to 6 billion, a year conventional and low carbon opportunity enterprise wide in the hopper.
Those will go through our capital allocation filter, which Varian will also cover later on.
So on the energy markets.
Coming into the year, we saw growing demand and underinvestment in supply those energy prices higher.
The rest of Ukraine War is worse and demand supply gap, obviously, but it's also put energy back in the spotlight.
Energy markets are at an inflection point and were in an energy crisis.
There are three things that come out of this.
Any way you look at it global energy supply will need to increase to address national security risks affordability and reliability.
That means we'll now need an energy supply buffer and greater diversity of that supply to manage those risks.
Europes heavy reliance on Russia is driving this of course, but the impacts are broader and global regardless of when this war ends.
Second as the energy transition.
We will need to accelerate low carbon investments as well to meet demand achieve emission schools and as part of the security buffer.
To make that happen, we need to pick up the pace on proven ways to grow low carbon fuels like RMG hydrogen and especially carbon capture.
And that'll mean, leveraging existing transportation and storage infrastructure more quickly like ours.
It also means much more investment in natural gas to provide reliable lower carbon baseload power and to enable renewables.
Third North America will play a much larger role in the global energy market shares.
The North American energy advantage that we've been talking about is even more evident today massive low cost reserves and the technology to produce the lowest carbon intensity.
And of the 10 largest global producers, Canada and the U S are number one and two on sustainability you can see that with the ESG scores on this chart.
North America will be the supplier of choice you saw that already with the U S EU announcements to work together.
And Asian markets are also looking to secure long term supply.
The biggest opportunity in our view is natural gas exports with the potential for over 30 Bcf a day, that's more than triple last year and of course crude exports are set to grow by 50%.
All of this is very positive for infrastructure pointed at Tidewater.
Remember as well that the north American grid is integrate so growing global demand and exports is upsides to Canada and the U S.
What you see here is underpinned by strong energy demands.
We're going to need more supply, both conventional and low carbon energy and now that'll be needed faster.
80% of World demand comes from hard to the industrial uses and heavy transport and of course pet Chem demand growth.
It's also clear today that natural gas will be essential to meeting demand.
Even before the crisis Europe amended its taxonomy for clean energy to include natural gas.
On low carbon 25 trillion, we will need to be invested with renewables the largest component along with RMG hydrogen and again carbon capture.
We are headed in the right direction or is the tax credits and the Canadian government budget.
<unk> captured and there are U S proposals to expand sorry five G.
So what does all this mean for our strategy.
This slide recaps the two pronged approach we outlined for you at Enbridge day.
Our strategy is to invest in both conventional and low carbon energy and that makes even more sense today.
On the conventional side, we'll focus on optimizing throughput and modernizing your systems.
Although private will continue to align with the pace of transition and 225, we see over $4 billion of low carbon opportunities.
Finally, any new investment conventional horrible carbon will need to meet our investment criteria, so that will change.
When you step back from all of this we believe the two pronged strategy approach makes even more sense today, where energy security is back in the spotlight and where demand for conventional and low carbon energy supplies will continue to rise.
Now to the business update on gas transmission.
Very strong volumes with Texas Eastern 16.
16 of its top 25 peak days ever.
We're on track to put U S $1 2 billion into service this year and that's on top of the $2 4 billion last year.
The lions share spending is that new compression or modernization work yet.
And as long as our solar power projects were lowering emissions. For example, our current modernization program will take out 182000 tons of steel per year.
We're also excited about more organic growth.
We've got optionality to support growing domestic demand and its pretty clear.
More capacity in the U S northeast is needed to manage disruptions and peak demand.
We all know what's happening with low gas prices, but it's not pretty for U S northeast consumer side with gas prices at roughly five X Henry hub.
This situation screens for more infrastructure, especially given increased supply variability from offshore wind that's coming.
And more displacement of coal of course.
We put phase one of our Appalachia to market project into service last year phase two isn't preconstruction.
Building Greenfield is tough sledding of course these days, but these expansions are executable and cost effective and there is more that we can do.
LNG exports as a big opportunity with momentum building across the U S Gulf and now more so in Western Canada.
Our Texas Eastern system feeds LNG, along the Gulf Coast, we supply for plans today with about two Bcf a day.
We've locked up capacity agreements with three more LNG projects that could add up to seven Bcf a day and over 2 billion of new investments.
Plaquemines LNG is now fully contracted and likely going ahead, which will drive $400 million.
Ventas extension project.
Not in the secured category, yet, but we expect it to be shortly.
Texas LNG in Rio Grande LNG are also progressing.
In fact earlier. This week you saw next decade granted a 15 year SP with engie to support.
<unk> seen good momentum then here with both projects potentially reaching FID later, this year and by the way on rehab ground that could drive.
On our Rio Bravo pipeline.
Western Canada is another big growth region for us.
Shifting to fundamentals are bringing western Canada to the four once again.
You've got a world class liquids rich resource base that rivals the Marcellus and the Haynesville.
And operators have done every bit as good a job unlocking reserves.
We could see production grow 50% for LNG exports here and regional demand.
With growing demand in Europe for U S LNG Western Canada can step in to fill the gap.
Proximity to eastern markets provides two to four weeks reduced shipping times and lower emissions.
LNG break evens in Canada at roughly six to $8 and then Btu rivals the U S Gulf Coast and it looks very favorable if you look at East Asian, LNG prices somewhere in the orders of $30 <unk> in Q.
LNG, Canada is in construction of course with fiber is advancing early stage construction activity.
Whereas the main conduit out of the Montney and deep basin. So all of this bodes well for upstream expansion on our BC pipeline system.
On that note, we launched a binding open season today for 400 million cubic feet on T north.
That'll be a $1 billion expansion.
Wood fiber LNG is contracted on T cells with volumes currently flowing to the Pacific Northwest.
Once they reach F will.
We will need to create new capacity to replace volumes currently moving south.
And that expansion would be approximately $2 5 billion.
And depending on good fibers the.
Timing, we're targeting a binding open season on T cell for later this year and by the way just could also required further upstream expansion on the teen segment.
So all of this is shaping up to be a big opportunity multi years, which again goes to prove the value of pipe in the ground.
Now longer term, we also hold what could be too valuable pathways to the coast the Pacific trails in the West Coast connector corridors.
We look at these as low cost options on the future of LNG exports.
Now for either of these to move forward, we'll need to see a clear path to execution with strong local community support and commercial underpinnings. So we have a way to go for those.
Turning to liquids Q1 mainline throughput averaged 3 million barrels per day.
Seasonally we will see a more concentrated maintenance season in Q2 than we usually do.
Set by stronger volumes in the back end of the year.
But we remain on track for the full year average utilization of $2 95 billion barrels per day that we guided to in December .
On mainline tolling healthy dialogue here ongoing with shippers.
As you May recall, we shared our cost information, which was the precursor to negotiations.
Our sense is that shippers would prefer another incentive tolling deal of course that model works very well for 27 years and aligned us with the shippers.
But as we've said we will need to see an appropriate return given the risks we manage under that Mark.
Given us often challenging to come to consensus we're preparing our cost of service filing which is a very good alternative for us.
The schedule is the same as we showed you last time, where we expect to have a new tolling construct in place in 2023.
Now more broadly on liquids and how it fits within the shifting energy landscape I talked about earlier.
Our scale and access to the best markets provides a ton of optionality and value for our customers.
Our focus is adding highly executable capacity to the Midwest and the Gulf.
Expansion options are right sized and can be called as production grows.
In total.
Roughly 400000 barrels produced egress opportunity on the mainline and express.
We're also developing a new golf coast path by Pony Express that will link up Seaway.
Downstream, we are continuing to develop the Houston terminal opportunities.
And since we acquired Ingleside, we've seen increasing interest on several fronts, which is already proving out the other side.
On conventional we're progressing a 2 million barrel storage expansion the tunnel as already permanent for five actually so we can move that one along once we get commitments.
There is also potential emerging for Allen NGL exports and stay tuned for more on that over the next one.
Okay.
As you saw today, we're also now developing an integrated solution for blue hydrogen and ammonia production with humble oil.
Now the key to this concept is the integrated value chain through to exports.
Texas Eastern runs just north of angles site. So it nicely position provides feedstocks or hydrogen.
And it looks like the geology in this region is suited for carbon capture and storage.
The hydrogen and ammonia production would be desperate to meet local demand in the export market, which of course is book.
So multiple upsides at Ingalls.
Now I'm describing capture number.
In March we were awarded the right to move forward on a while does storage hub. So we are now validating the geology.
Another positive was the federal government's investment tax credit, 50% on capture and 30 37, 5% on transportation and storage.
This will go a long way to help make the numbers work.
At four mega tons per year captured with upside to that over time. This project will be one of the largest globally.
We've given you a preliminary timeline here, which could see the project in service as early as 2026.
Are you totally population growth will drive new gas connections and expansion of transmission and storage.
In fact, we just need an expansion of our Panhandle system.
It's a $300 million investment to support growing greenhouse and power demand market in Ontario.
So the utility continues to generate 1 billion.
<unk> 2 billion and a half of ratable annual investment so it's a great business and a real gem in our portfolio.
Moving to renewables, we had a strong quarter exceeding our resource targets. So that's good to see.
What we have in execution will drive visible EBITDA growth through 2024.
In France, we have for offshore projects in construction, including our first floating facility.
As you saw earlier, we're installing turbines at Saint Nazaire.
And we're in the fabrication phase Etsy com and Preconstruction at callbacks and prevalence from March.
In North America, we have 10 self power projects in progress seven of those should enter this year.
I remember that you can build these quicker given their inside the fence.
We're also moving along about three gigawatts of opportunity for the next phase of growth post 2024.
Before I pass it over to Barry.
As you heard we're seeing lots of positive fundamentals right now and I've covered a variety of opportunities in both the conventional and low carbon front.
So he is going to remind you about our framework and discipline around putting free cash flow to work and maximizing value.
Right.
Thank you al and good morning, everyone.
Our first quarter results were up significantly over 2021 on solid operational performance across all of our businesses.
And we saw the benefit of $14 billion of capital that we put to work last year.
In liquids the mainline moved about 3 million barrels per day in Q1.
Up 9% year over year, taking advantage of the additional capacity from line three.
As a reminder, until we finalize the tooling for the mainline will be including a provision in our results for that segment.
Our Ingalls side facility with its highly contracted cash flow is performing as expected and it should remain strong through the balance of the year.
Gas transmission utilization was solid.
And the one 4 billion of expansions added to our BC pipeline system last year are driving growth in EBITDA.
It's business as usual at the utility with customer growth and colder weather, making positive contributions in the first quarter.
In the quarter, our renewals business benefited from higher wind resource.
Energy services continued to experience <unk>.
Narrow basis differentials and backwardation in the quarter, so below expectations here.
Finally, lower capitalization of interest expense associated with line three replacement has resulted in higher financing costs. So it's been a very solid start to the year, let's move over to our outlook.
With the strong first quarter, we're confident we're on track to achieve full year guidance. Our systems are expected to continue to be highly Judah.
Including the mainline which is on track for it to nine 5 million barrels per day on average for the year.
As always this factors in a seasonal drop in throughput in the second and third quarters due to upstream and downstream maintenance activity.
Our exposure to rising commodity prices remains limited.
But we expect some modest upside at all signal in D. C P.
Gas distribution and renewable.
Remain on track to meet.
We're expecting energy services results in Q2 to be comparable to Q1, a slight headwind for the year.
Energy services outlook improves for 2023 and beyond as we have transportation and storage contracts expiring at the end of this year and early in 2023.
We're well protected against inflation as a reminder, 80% over revenue that some form of inflation protection through our various toll.
<unk> mechanisms.
Revenues are adjusted to regular rate filings.
Or directly through an embedded contractual inflation escalators.
Our secure capital has been largely contracted for 2022, which provides good protection against capital cost increases and we continue to manage our capital programs to active supply chain procurement and fixed price EPC contracts.
Our financing costs are also well protected about 90% of our debt.
Fixed rate debt minimizing our near term exposure to rising interest rates and we continue to optimize our financings.
We're generating a lot of cash flow and more investment capacity, so let's move on to our capital allocation framework.
Our priorities remain unchanged, we're making good progress on all fronts, our balance sheet is in great shape.
And we're on track for debt to EBITDA to be at the low end of our target range by the end of the year.
S&P and Fitch, just reaffirmed our triple B, how stable credit ratings.
We've increased our dividend, 3% in 2022 notes, our 27th consecutive annual increase and we initiated our share buyback program. That's.
That's the model going forward ratable dividend grow supplemented where it makes sense with share buybacks.
Our cash flow and balance sheet leave us with about 5% to $6 billion of annual investment capacity.
We expect between three to 4 billion will be deployed to low multiple organic expansions and system optimizations.
Along with utility rate base and modernization capital.
Gas transmission.
That leaves about $2 billion per year available for more organic growth asset acquisitions share buybacks or debt repayment.
Well review all of these options as we go through the year to ensure that we continue to maximize shareholder returns.
All of these options will need to meet our low risk business model exceed risk adjusted hurdle rates have a strong strategic fit.
Aligned with our emission reduction goals.
As always we will continuously evaluate options to recycle capital.
Where appropriate to supplement the 5% to $6 billion of annual investment capacity.
Our secured capital bucket continues to grow so let's move to that.
Today, our secured capital program sits at just over $10 billion.
These projects will support our 5% to 7% DCF per share growth outlook over our three year planning horizon.
The $10 billion secured capital includes 1 billion that we announced so far in 2022.
All of this secured capital is highly contracted or rate regulated which fits our low risk commercial model.
And as you just heard from al we're advancing a number of exciting opportunities across all of our businesses. This will drive growth in 2024 and beyond.
Before I turn it back to Al let me spend a minute on how we're advancing our ESG priorities.
As you know ESG is foundational to our business and our goal is to maintain and enhance our ESG.
Leading position.
We are getting our ESG priorities into our compensation and how we finance our business.
Our strategic plans and annual budgets also incorporate the strategies and the capital expenditures that are needed to meet our emissions goals.
We believe this differentiates us in our sector and better aligns us with all of our stakeholders customers investors communities and many more.
We're making good progress on the emission targets, we set in late 2020.
We continue to challenge ourselves to do better.
In addition to our 2020 emission targets earlier this year, we made some additional commitments.
These include working with organizations to support the development of the <unk>.
Emissions reduction guidelines for our sector.
Engaging with our suppliers to generate further scope three emissions reductions.
And provide more reporting different net zero scenarios.
Our sustainability report, which will be issued in June will provide more information on how emission reduction targets are factored into all of our capital investment decisions.
It will provide further detail on our buyer diversity programs provide more transparency on our path to net zero.
And provide an update on our approached indigenous reconciliation.
So in a nutshell, we continue to raise their bar, how we approach ESG.
With that our net turn it back to al.
Thanks, Brian a few takeaways to close.
The energy crisis demonstrates once again that all sources of energy are needed to ensure affordable reliable and secure energy, while achieving climate goals.
North America is an ideal spot to be part of the solution and Enbridge plays a key role.
Our footprint access to the best markets combined with being ahead of the curve on low carbon puts us in excellent position.
Our strong balance sheet and differentiated approach to sustainability means where natural midstream partner to upstream and downstream customers.
Finally, we will continue to take a disciplined approach and not compromise our low risk business model.
Taken together, we think this provides a great opportunity to grow the business and a solid value proposition for our investors I'll now turn it back over to the operator for Q&A.
Yeah.
Thank you we will now begin the question and answer session. If you have a question. Please press star one thing I've touched on phones, if you wish to be removed from the queue. Please press the pound sign our behalf ski.
If you are you seeing each speaker Poland.
You may need to pick up the handset first before pressing the numbers. Once again, if you have a question. Please press star one thing I've touched on pool.
Robert Kwan from RBC capital markets is on the line with a question.
If I can ask first about the capital allocation Pri.
Priorities for that $2 billion and clearly in the first quarter you showed that there's no it's not either or this number of things going on but I'm just wondering with some of the changes in the environment, whether that's the energy security acre opportunities.
The energy transition as well as you know.
The higher share price.
Can you just talk through how some things have just moved around since you last spoke about this on the last quarterly call.
That's a good question to start.
Well first of all.
As you heard through those remarks.
I think theres been.
Definitely a positive shift in the fundamentals.
We certainly will see more in the hopper for sure.
I think it's I think it's probably too early to tell whether that changes.
The broader outlook.
And you heard the comments that very made around capital allocation discipline.
You know I think the way we're looking at it at this point is Theres really no change to how we're looking at the allocation.
Discipline is going to remain around.
Around the balance sheet the dividend growth.
And we're going to continue to really make sure that we invest wisely.
So in a nutshell I guess a lot more opportunity, but we will continue to put up pretty strong filter on what we're doing.
And comparing opportunities that we have to invest capital with each other and so that's that's really how we look at it Robert No major change right now, but certainly more opportunity ahead.
Got it I just was wondering as part of that is there may be a bit more of a bias to reducing debt effectively just about printing balance sheet capacity for new projects in a specific project that Mike.
Be interested to get your comment on if theres a lot of stuff going on in D. C. As you highlighted and especially that T cell expansion.
Pretty big so if with fiber goes ahead, and just with growth in the L. D C.
Do you have a sensor can you provide some color as to whether you think supply diversity is one of their goals and therefore.
How is your project positioned versus say something.
The southern crossing line or do you see the potential for both of those projects to go ahead.
I think our project is destiny and great position there Robert for a bunch of reasons. The main one has to do with the competitiveness of the toll and that stems in large part from the scale of the system. So.
The other part is if you recall I mean, the west coast system is more or less a north south header.
And that gives us opportunity.
To expand to the West coast, but also to continue.
Volumes down down south as to the capital allocation implications there and the size of those projects you know if you think about it.
We're throwing off as Vern said, a lot of free cash flow right now and we will continue to do that over the next two to three years. So the projects that we're talking about are certainly not cash.
Cash.
Sumit and let's just say in the next couple of years in any material way. So you know in a way to get back to your original point, you're sort of building up some excess capacity here.
What was projects will come to fruition in the next 234 years capital spending wise.
As far as.
The balance sheet can expand on this but.
Essentially we're in very good shape right now I think we've been pretty clear about the.
$4 five to five and as he said will be near the.
Bottom of the range by the end of this year and going back to what I. Just said, it's possible that with free cash flow. The way. It is that we could pop below that four and a half in the next little while as you point out.
These are larger projects come to fruition. So in effect, we'll be building up some capacity for that.
That's great I appreciate the color. Thanks.
Okay.
Jeremy Tonet from Jpmorgan is on the line with a question.
Hi, good morning, Hi.
Alright.
Just wanted to start off with the new Ingleside hydrogen ammonia initiative as you outlined there just wondering if you could peel and a bit more I guess on what some of the drivers are that could help you reach a positive FID.
Who are the end customers that youre looking to service here what type of contractual support.
Are you expecting here what type of timeline just more color on this would be helpful.
Well I'm going to start and then.
We'll get calling to provide some more details you know this is a great example.
Of how pipe in facilities that are in place gives you an advantage and.
Just broadly speaking in this region Jeremy we've got.
A big gas header along the Gulf, We've got Seaway, we've got single site now and a bunch of.
Projects in development and as we went through pretty strong fundamental support here export wise.
Obviously gas is critical Ccs is critical so this has really.
Bunch of attributes to it that.
Go to that value chain I was talking about and we've got.
Essentially a brownfield industrial complex here with some very big players. So it's naturally.
Helpful for us to grow from this area.
And the business model.
You should be fit quite well with what's going on so that's the that's sort of the big picture here. These are sizeable opportunities that can really.
Move the needle so that's the background and context to how we're thinking about the region generally, but maybe Colin can provide some context around customers and market specific to this opportunity and the partner.
Yeah, Hey, thanks, Good morning, Jeremy Yes, so I'm thinking about this project, probably with a capital costs $2 billion to $3 billion.
We're just being so path of that.
In terms of it.
Commercial construct of course, we'd look to.
Term this out under a take or pay type arrangement and will be jointly marketing.
<unk> with our partner.
No I think think European fertilizer companies.
Domestic and.
And European.
Power Gen with respect to hydrogen.
So.
The concept is.
It's pretty novel exporting Decarbonize fossil fuels I think youll see more of these.
And of course, the Ingleside facility.
Because.
54 foot dredge depth now.
<unk> space to build facilities and is.
Close to open water. So that's that's the formula and model, we're looking for here.
Got it thank you for that.
Wanted to pivot.
Two the WCS be here and takeaway situation just we see a few different gives and takes here as far as <unk> is concern you at Trans Mountain Theres delays the Canadian government financing financing support is changing.
Still need to build through sensitive population areas.
So there is headwinds there uncertainty there.
But at the same time, even with oil at $100, we haven't really seen material.
He's out of the WCS be so do you see much growth out of the basin and shipper demand for more capacity that might underpin a new Cts if theres more demand takeaway takeaway demand in Cts seems like maybe it's a better option to incentivize that or do you not see this demand materializing and base it doesn't have much growth and.
That feeds into cost of service.
Being more likely outcome.
Okay I'll start again, Jeremy so.
Maybe I'll start this way the fundamentals here for the oil Sands basin in the basin generally in Western Canada are pretty positive I think we all know about the attributes around the size of the reserves are the surety of getting those to market.
And of course, the the upstream group has done a tremendous job.
In terms of lowering cash costs, but also on the emissions front, so I think fundamentally.
We're very positive on that part.
The signals I think that the.
Probably need to see going forward.
Obviously, we've got very high prices right now so that's positive.
But.
They're going to want to see some stability in that long term, we don't need $100 oil for that happen, but certainly.
Clarity on where it's going longer term, they're going to be looking at capital efficient solutions Debottlenecking first.
Everybody is concerned about supply chains.
And of course as you referred to egress out of the basin and that's where we come in which you know as we alluded to in the remarks. The mainline is extremely well positioned for this the mainline tolling agreement actually will be important in that we need to see clarity on the commercial underpinning for for those projects.
That we have in the queue here, which Colin can get to.
But when we see clarity on that in order for us to continue to.
Incrementally expand.
Again in this environment incremental expansion optimizations on the system are ideally suited I think for where where the basin is and what these producers.
I need to see in order to invest additional capital so the basin generally.
Probably behind in its ability to react to.
Two increasing prices here as we've seen compared to say the Permian just because of the nature of what we're talking about in the oil sands longer dated investment profiles.
So that's the that's the bigger picture.
Colin do you want to give some specifics around where we are on the expansion opportunities and the timing.
Yes, thanks al So we're keeping.
Our mainline expansion opportunities.
Ready to go here and are advancing long lead items to enable them to be there.
We believe industry will continue to want some egress or some insurance seagrass, having not had.
Any for for decades.
And we'll potentially weave that into any commercial arrangement, we negotiate sphere.
The timing of those will well have to be TBD, but.
We're keeping them keeping them warm Jeremy.
I'll just add one more thing here call.
Paul you mentioned in <unk> ex Jeremy.
In the bigger picture here again.
If you think about it we've got what would be too nice pathways through to the Gulf Coast and that'll continue to be an extremely strong market.
The thing Thats happened recently here in terms of the security buffers that we've been talking about is the.
The export position that we have relative to those two paths I think is going to be.
Ideal in terms of the longer term future of heavy oil coming out of Western Canada, We know that the Gulf coast as a great destination for that will continue to be but now we've got this additional opportunity.
To really generate greater exports out of that region too so that bodes well for us I think.
Yeah.
Got it that's helpful I'll leave it there thanks.
Okay. Thanks, Jim.
Hum from Scotiabank.
Lying with your question.
Good morning, everyone I want to circle back on the DC expansion projects. When you take a look at the T. North I guess, the first phase of the expansion as well as the second phase of the expansion.
Specifically in the first phase is that dependent on the T cell expansion and wood fiber or could we see that progress independently just to serve LNG, Canada demand.
I'll go quickly in that Cynthia will chime in so on teen North that goes ahead, regardless. So that's the binding open season, we're talking about.
On T cells.
Think that is.
Most probably dependent on wood fiber LNG sanctioning so.
That's the short answer Cynthia do you have anything to add there yeah. Thanks Al I think you covered it in your earlier remarks.
We see that volumes that are currently going to be assigned to work five very serving D. I D.
The U S.
Northeast, So windows 300 million keeps a day move towards hybrid and then we're going to need to come in with some additional supply. So that's why we really have that opportunity too.
N T cells when that happens.
Alright, Thanks for that and then B C can be a challenging place to.
Build pipe as coastal and Trans mountain.
Our learning how do you secure the supply chain and the development pipeline two to give you confidence in these large investments.
Well I think again I'll go first on the.
On the West I mean this is this is really the crux of the advantage I think here in this particular case.
Whether you look at.
The community.
Aspects of building new infrastructure.
And obviously.
The indigenous groups that are along the right of way.
The fact that we've been there for so long the fact that we have good relationships and the fact that in this particular situation.
We're not doing a lot of.
Looping or twinning of pipelines here, so I think in this case.
We're we're in pretty good position.
To expand the T cell system, certainly that goes for <unk> as well.
Supply chain wise.
That's something we're going to have to manage.
Everybody's I think exposed to increasing.
Costs here inflation and so forth. So it's something we can manage we've got.
Pretty in depth.
Our supply chain group here that looks at this strategically and can really bring the size of our company to bear.
In terms of base floating.
Particular contractors. So I think we're in reasonable shape. These days as far as you can be in a tough environment permitting wise and in an inflationary setting so.
Do you want to add anything sit there.
We have had obviously as al said, our long history of operating very successfully.
Challenges that everyone is facing and it's not just in D. C. As we know.
We need to continue to focus on our customers and our stakeholders.
We're doing a lot of work and we continue to want to progress these projects, but we do need that.
Holders' support and customer support so if we focus on those fundamentals as we havent passed and that.
Really allow us to continue to be successful.
Thank you.
They are up thing for any <unk> satish from Wells Fargo.
Line with question.
Thanks, Good morning on the Ingleside facility I, just wanted to get an update in terms of the interest youre seeing from customers to potentially export Ngls from the facility sounds like a.
Youre getting some traction there and if you did export Ngls would you be looking to export LPG as are our other NGL.
How much would your export and where would you sourced the ngls from.
Okay, Colin do you want to take that.
Hey.
Yes, good questions.
We're looking at.
Various forms of purity NGL export out of Ingleside.
Two specifics.
But we would we'd be sourcing them locally obviously and these are under development. So I think I'll just leave it there for now.
Yeah.
Okay got it and then.
Just staying in the U S. So gas production is increasing both in the northeast in the Haynesville.
In both regions have perhaps some egress constraints and recognizing that you've got pipelines in both areas are you evaluating any any potential projects to improve.
Improved takeaway and do you have the ability to do any brownfield expansions or would they need to be greenfield at this point.
Yeah, Yeah. Thanks, Yeah, we obviously have our Texas eastern system that leaves us in unique position to serve.
Production and get to that golf clubs markets with our existing infrastructure. So.
There are some opportunities and for both brownfield and obviously greenfield in the space.
So we're continuing to have those conversations.
With the key players are key customers to figure out the best path forward to serve the incremental needs.
Got it thank you.
Robert <unk> from CIBC is on the line with your question.
Yes. Thank you.
What has changed since we last spoke I'm wondering if you can discuss if there's been if you feel there is an understanding by policymakers, especially in the U S.
We need to get permitting moving in order to build the infrastructure that's required to deal with it some energy crisis.
Well, let me put it this way Rob I.
We're certainly hearing the right things.
And how would I put this they certainly get it.
And as you can imagine impact on consumers.
All the way from home heating costs too.
Prices at the pump I think everybody understands the situation really well.
I'm not convinced yet that.
Uh huh.
We're going to see quick action to provide additional clarity on regulatory and permitting I'm just being honest there.
There is a myriad of issues of course.
General policy issues related to <unk>.
Acceleration of.
Lower carbon opportunities you have.
Got federal versus state jurisdictions.
And you know quite quite a complex array of.
Permitting agencies and approvals that are required so I.
I think we all know what needs to be done here no doubt.
I think we're going to need a little bit of time for this to unfold, but certainly if there ever was a time in terms of the signals that are being sent around the impact on the consumers. This is it and so we're hopeful.
And we continue to do a lot of work on this.
As you know these roles change over time that we have and a big part of the role these days and all the people around this table.
Gauging with governments and explaining.
You know, what's happening and what we need to see in order to put capital to work we have that capital we've got the capability to work through these regulatory processes and permitting issues.
But certainly we need more policy supported at a very high level.
Hopefully that will come through.
I will add to do that.
You really have to be skilled in this area. These days, regardless of the policy issues that youre alluding to.
In terms of the ground campaign, if I can put it that way.
Cynthia alluded to this in.
Gauging communities.
The work, we do with indigenous groups. These are the things that really helped get projects moving so.
Those are those are the general thoughts.
Okay.
Yeah. Okay. Thank you that's helpful.
Okay. Thanks, Ralph.
Theresa Chen.
From Barclays.
Is on the line with a question.
Okay.
Thank you for taking my question.
First I wanted to ask about the mainline system and in the context of change.
Changes in global flows of crude and <unk>.
On the Russian.
Production and exports on the crude side currently seems to be we can proud, but certainly some long term uncertainty there coupled with Mexico publicly expressed intention to consume more and more of their domestic production, which is heavy sour in Nashville nature. There does seem to be an incremental bid in the marketplace for that sour barrel.
And I was wondering are these structured.
Structural themes.
Victor integrate discussion with shippers have the right and.
How do you view these things in light of the value and competitive advantage of your system, not just mainline, but really mid con ultimately to the Gulf coast.
Yeah, that's a great question Teresa.
I think the short answer is in cone can chime into this we're probably in the in the spot where it's too early to tell there is no doubt.
That there is a price change and that's been driven by different signals on supply.
And how you know Russian volumes get reabsorbed, and how flows realign and change I think that's yet to be determined.
But as I alluded to in the remarks, it's pretty clear that.
I'm going to say North America here, because while Canada and the U S because of the integrated nature of our.
Systems here in North America really are in position to fill this gap and we went through that.
Reserves are low cost, we've got reliability on our side.
Security, obviously is something we bring to the table so.
And you're seeing this right now.
Europe and Asia are going to be competing for for natural gas I know you didn't mention gas, but thats part of it as well.
You've seen that with some of the.
The LNG contracts that have just been signed up so we're probably a little bit early to figure out exactly where the flows get realigned but for sure. We're in pretty good position now on the mainline maybe.
Collyn you can just comment on what you think about that.
Yes, thanks for the question.
But I will give you the number here so 40% 45%.
Is is the market share position.
Presently.
For Canadian crude in the Gulf.
And the market's a good piece of it so.
The point, you're making is being alive and well for a while and I think the points you mentioned now even accentuate.
The competitiveness of Canadian crude.
And then you Didnt mentioned, Venezuela, but that's that's been.
Structural factor in decline as well into the Gulf. So.
The mainline seats all of that.
And as Al mentioned, we're looking at another path down.
Down through Cushing as well all sitting in the same.
Phenomenon.
So the mainline the mainline tolls.
Access that foundational.
Paul It's it's going to be an open access system.
We're taking contracting or firm service off the table so.
All shippers will have access to that time.
Thank you.
Would you mind, commenting on what is the latest cost estimate on the line five tunnel. Please.
Now I'd like to take that yeah sure. So I think.
We're probably looking there at about.
$750 million to recent probably trending up.
Got it thank you.
The cost the cost for the both both reroutes and Wisconsin and Michigan.
We will be factored into any.
Any tool.
The deal we arrived lifts with industry.
Understood.
Thanks.
Linda is there dailies from TD Securities is on the line with a question.
Thank you.
Further with respect to line five.
I guess one of the questions I would have is how do various policymakers and regulators and governments understand the importance of keeping our existing.
Energy infrastructure used and useful can you give us a sense of.
The timeline to resolve various challenges.
Along there and what some of the solutions might be to meet the needs of all holders.
Colin you want to take that.
Sure. Good morning wanted to so I agree with your point I think.
And I think you all mentioned this more broadly earlier I think policymakers.
All around.
On both sides of the border fully get the importance of.
Keeping existing infrastructure flowing, especially in light of recent events globally.
The Canadian government.
As shown up.
Loud and supportive on all elements of life science here.
In both Michigan and Wisconsin.
Comments made in the house of Commons this week with respect to that.
So that's all encouraging.
The timelines are on both.
R R.
Our multi year.
And we're working through the permitting processes on both.
And.
Kind of moving along as prudently.
And so early as we can so.
Yeah, that's the latest there Linda.
And just a quick comment on that Linda.
Collins right about the Canadian governments.
[laughter] activity and involvement here, which has been very strong, but it's also state governments and the surrounding region.
Both Michigan, and Wisconsin, who certainly get the criticality.
This infrastructure to their states and consumers.
Consumers in the region. So that's helpful too.
Thank you and just sticking in the region.
And Ontario provincial election, coming up can you comment quickly on any sort of potential implications for your preference presence in the province on assuming more.
More positive than that than any sort of challenges, but especially for your utility.
Michelle's here so she can answer that sure. Thanks Linda.
We've been working with the.
Everyone a number of initiatives whether that says we're looking at.
In R&D, our hydrogen but if.
If I pull back we have.
Very long history of working with a range of government.
We know that we're at critical asset the local economy.
Infrastructure, we have in places is very valuable and we really just don't see that changing in any material way.
Thank you.
Thanks Linda.
Ben Pham from BMO is on the line with your question.
Okay. Thanks, good morning, everybody.
Looking through your slides, there's a number of chunky projects, one or $2 billion in.
You've got in the BC LNG to it could be even even more than that I'm wondering is it do you have to point at a time where is.
Is that $5 billion to $6 billion of Capex. You mentioned previously is out there as well.
Potential upside momentum time, maybe not the $10 billion range, but it just sounds like there's.
Just a lot of pent up demand to.
Granite could grow the business.
Yeah, I'm going to get burned to comment, but just generally from my point of view Ben.
There may be.
Yes, I mean, it's always possible that that number rises but on the other hand I think the important thing is how we filter the number and.
Ensure that we maintain the discipline that we have been focused on here over the last number of years. So yes.
Yes.
Hopper.
Be larger, but we're going to be very careful about how much we deploy which has generally been constrained to the amount of free cash availability that we have to invest but I don't burn do you want to comment.
I think we've talked about this very.
Quite a bit at our Investor day in December and there's really no change.
The balance sheet is our number one priority having the flexibility in all markets is critical to us.
Our free cash flow generation and some room that we have on our balance sheet provides us $5 billion to $6 billion a year of investment capacity. So we're going to go through and make sure that the highest and most attractive projects get done first and then.
If we have too many opportunities.
It is unfortunate in some of these won't just proceed.
Okay.
Okay, Thanks for that and.
Hi.
What about the rich line.
Project could you provide a commercial update on on that project.
Yes.
Yes.
Yeah. Thanks, So I Ridge line, we're continuing to progress with that.
It will be.
And opportunity.
As we move forward, we're still awaiting a S I D.
So again that project.
As we currently plan to go forward, if we get the F. I E that would be a Q4 2026 cents servicing.
Okay, great. Thank you how could we kind of.
Thank you Beth.
Brian Reynolds from UBS.
On the line with the question.
Hi, good morning, everyone maybe.
Maybe just a follow up some of the questions on the heavy oil coming out of Western Canada. It seems here. The mainline is progressing towards a tolling agreement in 'twenty three and I was just curious as how we should think about.
So tolling agreement and the expansion of mainline and whether they are interrelated or whether the expansion ultimately could be announced before the resolution.
Okay, Colin do you want to.
Feel better.
Yeah. Thanks, Thanks, Brian Yeah. It's a good question, we talked about it a bit but to be clear.
They basically need to sequence.
Together I think you all mentioned this we need clarity on the cooling.
Agreement too.
Understand how any expansions would work within that framework. So.
I think that's the order that needs to happen.
Yes, just to put a point on it to Brian .
I think one of the things, we're talking about with the customers, calling and his team are.
In that.
We need to have that underpinning.
Like you said, we're ready to go on these and I think it'll be really important to provide some additional capacity here given the opportunity that's in front of the basin in terms of.
Where we're at fundamentally which is what we've been talking about on the call very positive, but so hopefully we can we can move the tolling agreement alone. So we can get moving on those.
That's great and in terms of the sequencing of events could that also impact the flanagan south and potential seaway expansion in 'twenty four or are those kind of a separate event in your view.
Yeah, Hey, Brian calling it.
So.
Those.
Are likely and it's in that same mix I think.
As we just talked about them in three south earlier.
Uh huh.
Full path to the golf is is the prize here and so it's likely those would be.
Considered or or concluded.
Together with.
The downstream.
Legs of that path would be contracted.
Bill maybe that's a question, whereas the capacity on the mainline potentially be more open access so.
But likely to come together all at once.
Makes sense and then just quickly as my final question.
Standard NGL exports out of corpus and more details to come on that but just curious if you could just talk about how the relationships with DCP and PSX and in addition to the new cracker in the region could ultimately drive success for the projects and you know ultimately whether enbridge when considering JV ing with the projects around NGL exports out of corpus.
I think thats back to your call.
Yeah. Thanks Louise.
<unk>.
Hesitant to get into too many specifics here, but yes, we do have.
Obviously, a great relationship with the with.
With the part as you mentioned and there'll be in the midst right.
I appreciate the color I have a great day everyone.
Thanks, Brett.
We have reached a time limit and are not able to take and if a good question. At this time I will now turn the call over to Jonathan Morgan for final remarks.
Okay, great. Thank you everyone for joining us. This morning, we appreciate your ongoing interest in Enbridge as well.
Our Investor Relations team is available following the call to address any additional questions. You may have so once again, thank you and have a great day.
This concludes today's conference call. Thank you for participating you may now disconnect.
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