Enbridge Energy Partners, L.P. (EEP)’ Terrible Q2 Earnings

Ethane rejection refers to a producer’s decision to keep ethane in the natural gas stream rather than separating it out to sell as an NGL. This is an increasingly common practice as shale gas production has flooded the market with ethane, depressing prices. In 2012, the country’s ethane supply grew 54%, accompanying those volumes was a 63% drop in price. Through the first six months of 2013, ethane spot prices were down more than 45% compared to the same period last year. It is a trend that will endure forever, but will punish Enbridge as long as it lasts.

Bottom line
Clearly, this was a terrible quarter for Enbridge Energy Partners, L.P. (NYSE:EEP). Looking ahead, there are market fundamentals, like the price of ethane, that will continue to wreak havoc on near-term earnings. Management has emphasized the long-term organic growth story and a transition to a lower-risk business model, supported by parent company Enbridge Inc (USA) (NYSE:ENB). While that outlook might be rosy, you cannot blame investors opting to stay on the sidelines for now.

The article Enbridge Energy Partners’ Terrible Q2 Earnings originally appeared on Fool.com and is written by Aimee Duffy.

Fool contributor Aimee Duffy has no position in any stocks mentioned, and neither does The Motley Fool.

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