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MarketScreener Homepage  >  Equities  >  Toronto Stock Exchange  >  Baytex Energy Corp    BTE   CA07317Q1054

BAYTEX ENERGY CORP

(BTE)
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Exclusive: Enbridge eases oil volume terms for Mainline pipeline in response to small producers' fears

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07/10/2019 | 03:08pm EDT
Enbridge Tower on Jasper Avenue in Edmonton

CALGARY, Alberta (Reuters) - Enbridge Inc has lowered oil-shipping requirements on its Mainline pipeline by nearly two-thirds, the company confirmed on Wednesday, a move likely to satisfy smaller producers that feared they would be elbowed out by the company's initial requirements.

Enbridge now requires minimum volume commitments of 2,200 barrels per day (bpd), down from the 6,000 bpd commitment it previously sought, Enbridge spokesman Jesse Semko told Reuters. The company confirmed the change after sources said Enbridge had made the adjustment.

Enbridge plans to turn the Mainline, North America's largest oil-shipping network, from a common carrier system that is open to all shippers, to one that is mostly contracted for up to two decades. The initial terms raised concerns among smaller shippers about meeting Enbridge's time and volume minimums.

But since spring, Enbridge has broadly consulted the industry and eased the stringent requirements, sources added. They spoke on condition of anonymity because Enbridge required non-disclosure agreements about its plans.

The commitments are for between eight and about 20 years, unchanged from the earlier terms.

The company plans to start open season, a period of soliciting bids for its Mainline space, in July. The change, subject to approval by the National Energy Board regulator, would take effect in 2021.

Locking shippers into long-term contracts offers Enbridge a chance to capitalize on delays to competitors' plans to build pipelines, and secure future cash flow at a time when anxiety about market access is dominating headlines.

The Mainline currently operates under a system in which shippers nominate the barrels they want to move each month, generating criticism that some larger producers inflate their nominations to game the system.

The Alberta government took the rare step in January of ordering oil production cuts to boost prices. Canada has the world's third-largest oil reserves, but a shortage of pipeline capacity has crimped Canadian prices and caused investors to shun the sector.

On Wednesday, one medium-sized oil producer, Baytex Energy Corp, said it was "very concerned" about Enbridge's plans to contract Mainline capacity.

"We do not like the current (nomination) system. ... Whatever ends up around Enbridge contracting that space needs to be fair to conventional producers," Baytex's chief executive, Ed LaFehr, said at a TD Securities investor conference in Calgary.

(Reporting by Nia Williams and Rod Nickel in Calgary, Alberta; Editing by Steve Orlofsky and Leslie Adler)

By Nia Williams and Rod Nickel

Stocks mentioned in the article
ChangeLast1st jan.
BAYTEX ENERGY CORP 1.60% 1.91 Delayed Quote.-21.99%
ENBRIDGE INC 0.09% 46.84 Delayed Quote.10.35%
LME NICKEL CASH -1.77% 14425 End-of-day quote.38.17%
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Financials (CAD)
Sales 2019 1 736 M
EBIT 2019 305 M
Net income 2019 99,0 M
Debt 2019 1 941 M
Yield 2019 -
P/E ratio 2019 10,1x
P/E ratio 2020 11,2x
EV / Sales2019 1,73x
EV / Sales2020 1,63x
Capitalization 1 063 M
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Mean consensus OUTPERFORM
Number of Analysts 14
Average target price 3,71  CAD
Last Close Price 1,91  CAD
Spread / Highest target 214%
Spread / Average Target 94,3%
Spread / Lowest Target 44,0%
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Managers
NameTitle
Edward D. LaFehr President, Chief Executive Officer & Director
Neil J. Roszell Chairman
Richard P. Ramsay Chief Operating Officer & Executive Vice President
Rodney D. Gray Chief Financial Officer & Executive Vice President
Raymond Tatsun Chan Lead Independent Director
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