Al Monaco backs North America's energy revolution on Mad Money

Enbridge confident the industry will emerge from pricing slump stronger than ever

Short-term pain will eventually lead to long-term gain on the North American energy production landscape, Enbridge president and CEO Al Monaco predicted Monday during a television appearance on CNBC’s Mad Money with Jim Cramer.

The price of oil continues to decline on world markets, with Brent and West Texas Intermediate crudes sliding to five-year lows on Monday. However, Enbridge, which owns and operates the world’s longest and most sophisticated crude oil and liquids pipeline system, has confidence that the energy industry will emerge from this pricing slump stronger than ever, said Mr. Monaco.

“It’s tough out there right now, let’s face it, for producers,” he said Monday during an in-studio appearance with Mad Money host Cramer in New York. “But in the long run, if you look at the effects of a low-interest-rate environment, coupled with low oil prices, I think this actually going to be a huge shot in the arm for not just our industry . . . but the entire economy, in terms of boosting GDP growth – in the longer term.”

Last Wednesday, Enbridge:

• boosted its next quarterly common share dividend by 33 per cent;
• announced a revised dividend policy payout range that is expected to result in an average annual dividend growth rate between 14 and 16 per cent from 2015 through 2018;
• and revealed plans to transfer about $17-billion in liquids pipelines and green energy assets to its Canadian affiliate Energy Income Fund, in order to support new organic growth opportunities and asset acquisitions.

Cramer, a former hedge fund manager and bestselling author, remarked to Mr. Monaco during Monday’s episode of Mad Money: “You guys are total straight shooters. I thought that the dividend boost in the midst of all this (uncertainty) shows you that . . . (Enbridge is) not a company that’s reliant on crude going back up to $100 (a barrel).”

Mr. Monaco noted that Enbridge remains an attractive investment opportunity – not only because it continually outperforms its peer group, and has a track record of meeting or exceeding earnings, but also because it is sheltered from the volatility of oil pricing on the open market.

“If you look at the dividend increase of 33 per cent, and then 14 to 16 per cent thereafter, it’s really driven by the fact that we have a high degree of certainty – not just in the earnings, but in cash flows from our existing assets, which have good embedded returns, plus the upside from the projects that are actually going into service. So (there’s) a high degree of reliability in the cash coming down, and that’s what gave us the confidence to boost the dividend,” he said.

“Most of our contracts are with large players with big balance sheets . . . and they’re in this for the long haul,” added Mr. Monaco. “We have contractual terms that give us pretty good degree of reliability on our cash flows, there’s no doubt.”

During his appearance on Mad Money, Mr. Monaco also discussed the recent completion of Enbridge’s $2.8-billion Flanagan South pipeline, a 590-mile line from Pontiac, Ill., to Cushing, Okla., with a capacity of about 585,000 barrels per day, as well as the Canadian oilsands producers’ needs for market access.

Watch Monday’s entire interview on the Mad Money website.