Enbridge Energy Partners L.P. (EEP) reported its fourth quarter 2009 earnings of 64 cents per unit, in line with the Zacks Consensus Estimate and the year-earlier earnings of 67 cents. Total revenues for the quarter decreased more than 12% year over year to $1.63 billion.

Enbridge declared an unchanged cash distribution of 99 cents per unit or $3.96 per unit annualized. Despite an increase in its net operating cash flow, the partnership’s cash distribution growth profile does not compare favorably with the other players in the MLP space. Last week, Sunoco Logistics Partners L.P. (SXL) raised its distribution rate by 2.3% sequentially.

Volume in the partnership’s liquid systems modestly decreased year over year to 2,029 thousand barrels per day (MBbl/d). The decrease was mainly due to lower transported volumes in the partnership’s Lakehead liquid systems, partially offset by increased volumes in the other two systems (Mid-Continent and North Dakota). These systems accounted for 82%, 12% and 6%, respectively, of the total liquids transported during?the quarter.

Operating income in the Liquids segment increased more than 23% year over year to $117.5 million, primarily driven by transportation rate increases in connection with the completion of stage 2 of the partnership’s Southern Access Expansion. The increased operating income was partially offset by higher operating costs. Operating costs went up by $10.8 million from the year-ago quarter.

During the quarter, natural gas volumes decreased nearly 22% from the year-earlier period to 2,117,000 MMBtu/d. All natural gas systems (East Texas, Anadarko and North Texas systems) were down on a year over year basis. These systems accounted for approximately 58%, 25% and 17%, respectively, of the partnership’s total natural gas volumes during the quarter. Operating income for the Natural Gas segment decreased more than 22% year over year to $27.8 million due to lower volumes, partially offset by lower operating costs.

The Marketing segment reported an adjusted operating income of $3.4 million during the quarter, down 48% from the year-ago quarter. This decrease was mainly on account of lower natural gas prices.
Management termed this year as a challenging period for the partnership despite improving energy fundamentals. Net income is expected to be in the range of $350 million and $380 million for the year.
Though the expansion and diversification of Enbridge’s asset base over the past few years has created opportunities for internal growth projects, we maintain our Neutral recommendation based on the partnership’s weak distribution growth prospects.

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