Canadian company Enbridge has sealed a letter of intent (LoI) with US supermajor Chevron which could see the pipeline player's central Gulf of Mexico offshore system expand to carry output from the planned Walker Ridge area developments.

Under the terms of the LoI, Enbridge proposes to build, own and operate the Walker Ridge Gathering System (WRGS) to provide natural gas gathering services to the potential Jack, St Malo and Big Foot ultra-deep water developments.

The estimated cost of the WRGS is about $500 million, subject to finalisation of scope and definitive cost estimates.

Enbridge boss Patrick Daniel said: "The Walker Ridge Gathering System will tie in a new supply source for Enbridge's Manta Ray and Nautilus offshore pipeline systems, enhancing Enbridge's existing offshore pipeline business and establishing a strategic base for future growth opportunities in the ultra-deep Gulf of Mexico.

"In addition, the development of the new gathering system represents an attractive investment opportunity itself, with risk and return characteristics comparable to Enbridge's normal business model."

The WRGS is expected to include about 190 miles (305 kilometres) of 8-inch,10-inch and/or 12-inch diameter pipeline at depths of up to 7000 feet and will have a capacity of 100 million cubic feet per day.

Meanwhile, Enbridge saw its quarterly profit fall from last year, when it benefited from a huge gain on the sale of its stake in a Spanish pipeline.

However, it said it was on track to achieve the upper half of its full-year adjusted earnings outlook and an annual growth rate of greater than 20%.

The company sees full-year adjusted earnings in the range of between C$2.18 and C$2.32 per share.

The company said second-quarter net income dropped to C$393 million, or C$1.08 per share, from C$657.7 million, or C$1.81, in the second quarter of 2008.

The 2008 results included an aftertax gain of C$556.1 million on the sale of its interest in Compania Logistica de Hidrocarburos.

Adjusted earnings, excluding most one-time items, rose to C$194.5 million, or 54 Canadian cents per share, from C$149.5 million, or 42 Canadian cents.

Revenue fell 22.1% to C$2.59 billion.

The results beat the average analyst profit expectation of 49 Canadian cents, according to Reuters Estimates.