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Enbridge, NextDecade Collaborate to Build Rio Bravo Pipeline

Zacks Equity Research

Enbridge Inc. ENB recently signed a Memorandum of Understanding (MOU) with NextDecade Corporation NEXT to build the Rio Bravo natural gas pipeline and several other gas pipelines in South Texas. The pipelines are expected to support NextDecade’s proposed Rio Grande LNG export terminal in Brownsville, TX.

The 135.5-mile proposed Rio Bravo pipeline, which is part of a $20-billion project, is expected to have a transportation capacity of 4.5 billion cubic feet of natural gas per day. It will deliver natural gas from the Agua Dulce hub near Corpus Christi to the proposed Rio Grande LNG terminal, which is currently facing some challenges from localites and yet to receive federal permissions.

On completion of construction, the pipeline will transport natural gas from the Eagle Ford Shale and prolific Permian Basin, where natural gas production is on the rise. In the Permian, natural gas is produced as a by-product of crude oil. As oil production in the basin is projected to increase in the coming years, natural gas output will likely surge proportionately. Markedly, the MOU is expected to be finalized in fourth-quarter 2019.

The new pipelines to be built with NextDecade will enable Enbridge to earn more stable fee-based revenues under long-term contracts. Notably, Enbridge placed two key projects online in 2019 and is planning to bring several major projects online through 2019 to 2022. Overall, C$19 billion worth of low-risk new projects are likely to fetch the company more profits and raise the value of its shareholders in the coming years. It is well positioned to capitalize on the growing need for natural gas in North America, courtesy of the rapidly expanding business.

Price Performance

Calgary, Canada-based Enbridge has gained 13.2% year to date compared with 11.3% rally of the industry it belongs to.

Zacks Rank and Stocks to Consider

Currently, Enbridge carries a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are National Oilwell Varco, Inc. NOV and Dril-Quip, Inc. DRQ. While National Oilwell sports a Zacks Rank #1 (Strong Buy), Dril-Quip has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

National Oilwell’s 2019 earnings per share are expected to rise 137.5% year over year.

Dril-Quip’s 2019 earnings per share are expected to rise 127% year over year.

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National Oilwell Varco, Inc. (NOV) : Free Stock Analysis Report
Dril-Quip, Inc. (DRQ) : Free Stock Analysis Report
Enbridge Inc (ENB) : Free Stock Analysis Report
NextDecade Corporation (NEXT) : Free Stock Analysis Report
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