Press Release

DBRS Confirms Express Pipeline Limited Partnership & Express Pipeline LLC at A (low) and BBB, Stable

Energy
May 12, 2017

DBRS Limited (DBRS) has today confirmed the Issuer Rating and the rating on the Senior Secured Notes due 2020 of Express Pipeline Limited Partnership & Express Pipeline LLC (collectively, Express or the Company) at A (low) and the rating on its Subordinated Secured Notes due 2019 at BBB. All trends are Stable. The ratings reflect the Company’s low business risk profile, which is supported by firm long-term shipping contracts covering a majority of the pipeline’s capacity and provides predictable cash flows with no direct exposure to commodity risk.

DBRS rates Express on a stand-alone basis and does not assume any credit support from its ultimate parent, Enbridge Inc. (Enbridge; rated BBB (high) with a Stable trend by DBRS). DBRS has determined that the merger between Enbridge and Spectra Energy Corp does not have an impact on the stand-alone credit quality of Express. (Please refer to the DBRS press release “DBRS Confirms Spectra Energy Capital, LLC and Rated Subsidiaries, Removes UR-Dev. Status” published on September 8, 2016.) Express is a crude oil pipeline system that offers competitive tolling options for the Western Canadian Sedimentary Basin (WCSB) and the Bakken and Rockies crude oil producers shipping to refineries in the U.S. Rockies (PADD IV)) and Midwest (PADD II) regions. Despite the weak commodity price environment, average volumes flowing on the pipeline system were higher in 2016. The Company’s committed long-term take-or-pay contracts and fee-for-service tolling structure with annual toll escalators provide for revenue and cash flow growth. Express faces volume risk on the uncommitted volumes flowing on the Platte section of the pipeline from Wyoming to Illinois. However, Platte is the only crude oil pipeline connecting PADD IV to PADD II, which is the destination for much of the WCSB’s heavy oil shipments, and volumes are supported by refinery demand in Illinois. The Company completed the $135 million Express Enhancement project in Q4 2016, which increased the effective pipeline capacity by 21,000 barrels per day to meet additional demand. DBRS expects the Company’s business risk profile to remain stable over the medium term.

The Company’s credit metrics (cash flow-to-debt of 179.1%; debt-to-capital of 21.5%; and EBIT-to-interest of 19.1 times as at December 31, 2016) are in line with DBRS’s expectations, as Express benefits from high-capacity utilization and a stream of contracted cash flows. Credit metrics have continued to improve with growing cash flow and the scheduled amortization of debt. Capital expenditure is expected to be minimal in the near term and can be adequately supported by internally generated cash flow and no incremental debt issuance. In the medium term, the Company could maximize take-away capacity by expansion and/or connecting with the Enbridge Mainline.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The principal methodologies are Rating Companies in the Pipeline and Diversified Energy Industry and DBRS Criteria: Guarantees and Other Forms of Support, which can be found on dbrs.com under Methodologies.

DBRS will publish a full report shortly that will provide additional analytical detail on this rating action. If you are interested in receiving this report, contact us at info@dbrs.com.

Ratings

Express Pipeline Limited Partnership & Express Pipeline LLC
  • Date Issued:May 12, 2017
  • Rating Action:Confirmed
  • Ratings:A (low)
  • Trend:Stb
  • Rating Recovery:
  • Issued:CA
  • Date Issued:May 12, 2017
  • Rating Action:Confirmed
  • Ratings:A (low)
  • Trend:Stb
  • Rating Recovery:
  • Issued:CA
  • Date Issued:May 12, 2017
  • Rating Action:Confirmed
  • Ratings:BBB
  • Trend:Stb
  • Rating Recovery:
  • Issued:CA
  • US = Lead Analyst based in USA
  • CA = Lead Analyst based in Canada
  • EU = Lead Analyst based in EU
  • UK = Lead Analyst based in UK
  • E = EU endorsed
  • U = UK endorsed
  • Unsolicited Participating With Access
  • Unsolicited Participating Without Access
  • Unsolicited Non-participating

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