Spectra Energy Reports First Quarter 2010 Results
HOUSTON, May 4 /PRNewswire-FirstCall/ –
- Ongoing net income from controlling interests of $342 million, $0.53 earnings per share (EPS), compared with $210 million, $0.33 EPS, in the prior year quarter.
- Quarter positively affected by earnings from expansion projects and stronger commodity prices.
- Continued successful execution of capital expansion plan:
- Received approval from Canada’s National Energy Board for the Fort Nelson North processing facility, and
- Placed into service T-North and North Maxhamish Loop projects in western Canada.
(Logo: http://www.newscom.com/cgi-bin/prnh/20061030/CLM051LOGO )
Spectra Energy Corp (NYSE: SE) reported 2010 first quarter net income from controlling interests of $358 million, or $0.55 diluted EPS, compared with $298 million, $0.47 diluted EPS, in the prior year quarter. Ongoing net income from controlling interests for the 2010 quarter was $342 million, or $0.53 diluted EPS, versus $210 million, $0.33 diluted EPS, in the prior year quarter.
“We achieved very good first quarter results, which reflect sound performance from each of our businesses and the benefit of improved commodity prices. This quarter’s results have given investors a very clear picture of the robust benefits of Spectra Energy’s broad-based portfolio of natural gas infrastructure assets,” said Greg Ebel, president and chief executive officer, Spectra Energy Corp.
“We continue to successfully execute on more than $3 billion in expansion projects that are fueling our 8 to 10 percent annual earnings growth through 2012.”
SEGMENT RESULTS
U.S. Transmission
U.S. Transmission reported first quarter 2010 earnings before interest and taxes (EBIT) of $247 million, compared with $217 million in first quarter 2009. The segment benefited from business expansion projects previously placed into service, including Maritimes & Northeast Pipeline Phase IV, Steckman Ridge Storage, Northern Bridge, Algonquin J-2 Expansion, and Moss Bluff and Egan Storage projects.
Distribution
Distribution reported first quarter 2010 EBIT of $146 million, compared with $152 million in first quarter 2009. The decrease is mainly due to lower customer usage, primarily driven by weather which was more than 10 percent warmer than the same period last year. This decrease was substantially offset by the effect of a stronger Canadian dollar.
Western Canada Transmission & Processing
Western Canada Transmission & Processing reported first quarter 2010 EBIT of $119 million, compared with $81 million in first quarter 2009. The segment benefited from improved results in the base gathering and processing business, primarily driven by higher contracted volumes from expansion programs, including West Doe, South Peace Pipeline and Fort Nelson. The segment also benefited from higher frac spreads at the Empress natural gas liquids (NGL) business as well as the effect of a stronger Canadian dollar.
Field Services
Field Services reported first quarter 2010 ongoing EBIT of $99 million, compared with $15 million in first quarter 2009. The increase in ongoing earnings was primarily driven by higher commodity prices. During first quarter 2010, crude oil averaged approximately $79 per barrel, compared with approximately $43 per barrel in the prior year quarter, and NYMEX natural gas averaged approximately $5.30 per million British thermal unit (MMBtu) versus $4.89 per MMBtu during the same period in 2009. The NGL to crude relationship averaged 58 percent during the first quarter 2010 versus 56 percent during the prior year quarter.
The prior year reported earnings of $150 million included a special item of $135 million related to a pre-tax recognition of a deferred gain.
DCP Midstream paid distributions of $75 million to Spectra Energy during the first quarter.
Other
“Other” reported net costs of $14 million in first quarter 2010, compared with net costs of $24 million in first quarter 2009, reflecting lower corporate costs during the current quarter.
Interest Expense
Interest expense was $159 million in first quarter 2010, compared with $150 million during the prior year quarter.
Income Taxes
First quarter 2010 income tax expense from continuing operations was $97 million, compared with $139 million reported in first quarter 2009. The effective tax rate was 21 percent in first quarter 2010, compared with 31 percent in first quarter 2009. The lower effective tax rate is primarily due to favorable audit settlements totaling $24 million and lower Canadian tax rates.
Special Items Affecting Spectra Energy's EPS for the Quarters
Include:
(in millions, except per-share amounts)
---------------------------------------
Net Income
-Controlling
Pre-tax Tax Interests EPS
Amount Effect Impact Impact
------- ------ ------------ ------
First Quarter 2010 $- $- $- $-
=== === === ===
First Quarter 2009
Gain on Units $135 $(50) $85 $0.14
Previously Issued ---- ---- --- -----
by DCP Partners
Total Special
Items $135 $(50) $85 $0.14
---- ---- --- -----
Reconciliation of Reported to Ongoing Net Income - Controlling
Interests
(in millions)
Quarters Ended
March 31,
2010 2009
---- ----
Net Income - Controlling Interests as
Reported $358 $298
Adjustments to Reported Net Income -
Controlling Interests:
Special Items - (85)
Discontinued Operations (16) (3)
--- ---
Ongoing Net Income - Controlling
Interests $342 $210
==== ====
Reconciliation of Reported to Ongoing Diluted EPS
-------------------------------------------------
Quarters Ended
March 31,
2010 2009
---- ----
Diluted EPS as
Reported $0.55 $0.47
Special Items - (0.14)
Discontinued
Operations (0.02) -
----- ---
Diluted EPS,
Ongoing $0.53 $0.33
===== =====
Additional Information
Additional information about first quarter 2010 earnings can be obtained via the Spectra Energy Web site: www.spectraenergy.com.
The analyst call is scheduled for today, Tuesday, May 4, 2010, at 9:00 a.m. CT. The webcast can be accessed via the Investors Section of Spectra Energy’s Web site or the conference call can be accessed by dialing (888) 252-3715 in the United States or Canada, or (706) 634-8942 for International. The conference code is “67797453″ or “Spectra Energy Quarterly Earnings Call.”
Please call five to ten minutes prior to the scheduled start time. A replay of the call will be available until August 6, 2010, by dialing (800) 642-1687 with conference ID 67797453. The international replay number is (706) 645-9291, with above conference ID. A replay and transcript also will be available by accessing the Investors Section of the company’s Web site.
Non-GAAP Financial Measures
We use ongoing net income and ongoing diluted EPS, which are non-GAAP financial measures as they represent net income (controlling interests) and diluted EPS, adjusted for special items and discontinued operations, as measures to evaluate operations of the company. Special items represent certain charges and credits which we believe will not be recurring on a regular basis, and discontinued operations do not represent our ongoing core business. We believe that the presentation of ongoing net income and ongoing diluted EPS provide useful information to investors, as it allows them to more accurately compare our ongoing performance across periods.
The primary performance measure used by us to evaluate segment performance is segment EBIT from continuing operations, which at the segment level represents earnings from continuing operations (both operating and non-operating) before interest and taxes, net of noncontrolling interests related to those earnings. We consider segment EBIT, which is the GAAP measure used to report segment results, to be a good indicator of each segment’s operating performance from its continuing operations as it represents the results of our ownership interest in operations without regard to financing methods or capital structures.
We also use ongoing segment and Other EBIT as a measure of performance. Ongoing segment and Other EBIT is a non-GAAP financial measure as it represents reported segment and Other EBIT adjusted for special items. We believe that the presentation of ongoing segment and Other EBIT provides useful information to investors, as it allows them to more accurately compare a segment’s or Other’s ongoing performance across periods. The most directly comparable GAAP measure for ongoing segment or Other EBIT is reported segment or Other EBIT, which represents EBIT from continuing operations, including any special items.
Forward-Looking Statements
This release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events. One can typically identify forward-looking statements by the use of forward-looking words such as: may, will, could, project, believe, expect, estimate, continue, potential, plan, forecast and other similar words. Such statements are subject to risks, uncertainties and other factors, many of which are outside our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. Those factors include: the implementation of state, federal and foreign legislative and regulatory initiatives that affect cost and investment recovery, have an effect on rate structure, and affect the speed at and degree to which competition enters the natural gas industries; the outcome of litigation and regulatory investigations, proceedings or inquiries; the effect of weather and other natural phenomena, including the economic, operational and other effects of hurricanes and storms; the timing and extent of changes in commodity prices, interest rates and foreign currency exchange rates; general economic conditions, which can affect the long-term demand for natural gas and related services; potential effects arising from terrorist attacks and any consequential or other hostilities; changes in environmental, safety and other laws and regulations; the results of financing efforts, including the ability to obtain financing on favorable terms, which can be affected by various factors, including credit ratings and general market and economic conditions; increases in the cost of goods and services required to complete capital projects; declines in the market prices of equity and debt securities and resulting funding requirements for defined benefit pension plans; our ability to identify opportunities for our business units and the timing and success of efforts to develop pipeline, storage, gathering, processing and other infrastructure projects; the performance of natural gas transmission and storage, distribution and gathering and processing facilities; the extent of success in connecting natural gas supplies to gathering, processing and transmission systems and in connecting to expanding gas markets; the effects of accounting pronouncements issued periodically by accounting standard-setting bodies; conditions of the capital markets in general ; and our ability to successfully complete and integrate future acquisitions. These factors, as well as additional factors that could affect our forward-looking statements, are described under the headings “Risk Factors” and “Forward-Looking Statements” in our 2009 Form 10-K, filed on February 25, 2010, and in our other filings made with the Securities and Exchange Commission (SEC), which are available via the SEC’s Web site at www.sec.gov. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Spectra Energy Corp (NYSE: SE), a FORTUNE 500 company, is one of North America’s premier natural gas infrastructure companies serving three key links in the natural gas value chain: gathering and processing, transmission and storage, and distribution. For nearly a century, Spectra Energy and its predecessor companies have developed critically important pipelines and related infrastructure connecting natural gas supply sources to premium markets. Based in Houston, Texas, the company operates in the United States and Canada approximately 19,100 miles of transmission pipeline, more than 285 billion cubic feet of storage, as well as natural gas gathering and processing, natural gas liquids operations and local distribution assets. The company also has a 50 percent ownership in DCP Midstream, one of the largest natural gas gatherers and processors in the United States. Spectra Energy is a member of both the Dow Jones Sustainability Index North America and the U.S. S&P 500 Carbon Disclosure Leadership Index. For more information, visit www.spectraenergy.com.
Spectra Energy Corp
Quarterly Highlights
March 2010
(Unaudited)
(In millions, except per-share amounts and where noted)
Quarters Ended
March 31,
---------
2010 2009
---- ----
COMMON STOCK DATA
Earnings Per Share From Continuing
Operations
Basic and Diluted $0.53 $0.47
Earnings Per Share
Basic and Diluted $0.55 $0.47
Dividends Per Share $0.25 $0.25
Weighted-Average Shares Outstanding
Basic 648 628
Diluted 649 629
INCOME
Operating Revenues $1,480 $1,384
Total Reportable Segment EBIT 611 600
Income from Discontinued Operations,
Net of Tax 16 3
Net Income - Controlling Interests 358 298
EBIT BY BUSINESS SEGMENT
U.S. Transmission $247 $217
Distribution 146 152
Western Canada Transmission &
Processing 119 81
Field Services 99 150
--- ---
Total Reportable Segment EBIT 611 600
Other EBIT (14) (24)
---
Total Reportable Segment and Other
EBIT $597 $576
==== ====
CAPITAL AND INVESTMENT EXPENDITURES
(a)
U.S. Transmission $73 $99
Distribution 32 34
Western Canada Transmission &
Processing 68 37
Other 6 6
---
Total Capital and Investment
Expenditures $179 $176
==== ====
March 31, December 31,
2010 2009
---- ----
CAPITALIZATION
Common Equity - Controlling Interests 41% 40%
Noncontrolling Interests and Preferred
Stock 4% 4%
Total Debt 55% 56%
Total Debt $9,952 $9,918
Book Value Per Share (b) $11.57 $11.01
Actual Shares Outstanding 648 647
(a) Includes loans to affiliates for capital expansion
projects.
(b) Represents controlling interests.
Spectra Energy Corp
Quarterly Highlights
March 2010
(Unaudited)
(In millions, except where noted)
Quarters Ended
March 31,
---------
2010 2009
---- ----
U.S. TRANSMISSION
Operating Revenues $457 $405
Operating Expenses
Operating, Maintenance and Other 152 143
Depreciation and Amortization 64 59
Gains on Sales of Other Assets and Other, net - 10
Other Income and Expenses 26 20
Noncontrolling Interests 20 16
EBIT $247 $217
---- ----
Proportional Throughput, TBtu (a) 818 713
DISTRIBUTION
Operating Revenues $668 $708
Operating Expenses
Natural Gas Purchased 371 435
Operating, Maintenance and Other 103 81
Depreciation and Amortization 48 40
EBIT $146 $152
---- ----
Number of Customers, Thousands 1,328 1,312
Heating Degree Days, Fahrenheit 3,321 3,698
Pipeline Throughput, TBtu 304 327
Canadian Dollar Exchange Rate, Average 1.04 1.24
WESTERN CANADA TRANSMISSION & PROCESSING
Operating Revenues $355 $271
Operating Expenses
Natural Gas and Petroleum Products Purchased 81 71
Operating, Maintenance and Other 115 88
Depreciation and Amortization 42 32
Other Income and Expenses 2 1
EBIT $119 $81
---- ---
Pipeline Throughput, TBtu 150 162
Volumes Processed, TBtu 163 167
Empress Inlet Volumes, TBtu 187 211
Canadian Dollar Exchange Rate, Average 1.04 1.24
FIELD SERVICES
Equity in Earnings of DCP Midstream, LLC $99 $150
EBIT $99 $150
--- ----
Natural Gas Gathered and Processed/
Transported, TBtu/day (b) 6.7 7.0
Natural Gas Liquids Production, MBbl/d (b,c) 353 331
Average Natural Gas Price Per MMBtu (d) $5.30 $4.89
Average Natural Gas Liquids Price Per Gallon $1.09 $0.57
OTHER
Operating Revenues $13 $12
Operating Expenses 24 32
Other Income and Expenses (3) (4)
EBIT $(14) $(24)
---- ----
(a) Trillion British thermal units
(b) Includes 100% of DCP Midstream volumes
(c) Thousand barrels per day
(d) Million British thermal units. Average price based on NYMEX
Henry Hub
Spectra Energy Corp
Condensed Consolidated Statements of Operations
(Unaudited)
(In millions)
Quarters Ended
March 31,
---------
2010 2009
---- ----
Operating Revenues $1,480 $1,384
Operating Expenses 988 969
Gains on Sales of Other Assets and
Other, net - 10
-
Operating Income 492 425
--- ---
-
Other Income and Expenses 126 176
Interest Expense 159 150
Earnings From Continuing Operations
Before Income Taxes 459 451
Income Tax Expense From Continuing
Operations 97 139
--- ---
-
Income From Continuing Operations 362 312
Income From Discontinued Operations,
net of tax 16 3
--- ---
-
Net Income 378 315
Net Income - Noncontrolling Interests 20 17
--- ---
-
Net Income - Controlling Interests $358 $298
==== ====
Spectra Energy Corp
Condensed Consolidated Balance Sheets
(Unaudited)
(In millions)
March
31, December 31,
2010 2009
---- ----
ASSETS
Current Assets $1,269 $1,429
Investments and Other
Assets 6,484 6,356
Net Property, Plant and
Equipment 15,706 15,347
Regulatory Assets and
Deferred Debits 988 947
--- ---
Total Assets $24,447 $24,079
======= =======
LIABILITIES AND EQUITY
Current Liabilities $2,203 $2,495
Long-term Debt 9,088 8,947
Deferred Credits and
Other Liabilities 4,844 4,747
Preferred Stock of
Subsidiaries 258 225
Equity 8,054 7,665
----- -----
Total Liabilities and
Equity $24,447 $24,079
======= =======
Spectra Energy Corp
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In millions)
Quarters Ended
March 31,
---------
2010 2009
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $378 $315
Adjustments to reconcile net income to
net cash 92 241
provided by operating activities --- ---
Net cash provided by operating
activities 470 556
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used in investing
activities (206) (142)
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash used in financing activities (302) (405)
---- ----
Effect of exchange rate changes on cash - (2)
--- ---
Net increase (decrease) in cash and
cash equivalents (38) 7
Cash and cash equivalents at beginning
of period 196 214
---
Cash and cash equivalents at end of
period $158 $221
==== ====
Spectra Energy Corp
Reported to Ongoing Earnings Reconciliation
March 2010 Quarter-to-date
(In millions, except per-share amounts)
Reported Discontinued Total Ongoing
Earnings Operations Adjustments Earnings
-------- ------------ ----------- --------
SEGMENT
EARNINGS
BEFORE
INTEREST
---------
AND TAXES FROM
CONTINUING
--------------
OPERATIONS
----------
U.S.
Transmission $247 $- $- $247
Distribution 146 - - 146
Western Canada
Transmission & 119 - - 119
Processing
Field Services 99 - - 99
Total
Reportable
Segment EBIT 611 - - 611
Other (14) - - (14)
--- --- --- ---
Total
Reportable
Segment and
Other EBIT $597 $- $- $597
==== === === ====
EARNINGS
--------
Total
Reportable
Segment EBIT
and Other $597 $- $- $597
EBIT
Interest
Expense (159) - - (159)
Interest Income
and Other 21 - - 21
Income Taxes
from
Continuing
Operations (97) - - (97)
Discontinued
Operations,
net of Tax 16 (16) A (16) -
--- --- --- ---
Total Earnings $378 $(16) $(16) $362
Total Earnings
-
Noncontrolling
Interests (20) - - (20)
--- --- --- ---
Total Earnings
-Controlling
Interests $358 $(16) $(16) $342
==== ==== ==== ====
EARNINGS PER
SHARE, BASIC $0.55 $(0.02) $(0.02) $0.53
------------- ===== ====== ====== =====
EARNINGS PER
SHARE, DILUTED $0.55 $(0.02) $(0.02) $0.53
--------------- ===== ====== ====== =====
A -Primarily a tax adjustment related to previous discontinued
operations and net revenues from Sonatrach settlement.
Weighted Average Shares (reported and ongoing) - in millions
Basic
648
Diluted
649
Spectra Energy Corp
Reported to Ongoing Earnings Reconciliation
March 2009 Quarter-to-date
(In millions, except per-share amounts)
Reported Discontinued
Earnings Special Items Operations
-------- ------------- ------------
SEGMENT EARNINGS
BEFORE INTEREST AND
TAXES FROM CONTINUING
OPERATIONS
----------------------
U.S. Transmission $217 $- $-
Distribution 152 - -
Western Canada
Transmission &
Processing 81 - -
Field Services 150 (135) A -
Total Reportable
Segment EBIT 600 (135) -
Other (24) - -
--- --- ---
Total Reportable
Segment and Other
EBIT $576 $(135) $-
==== ===== ===
EARNINGS
--------
Total Reportable
Segment EBIT and
Other EBIT $576 $(135) $-
Interest Expense (150) - -
Interest Income and
Other 25 - -
Income Taxes from
Continuing Operations (139) 50 -
Discontinued
Operations, net of
Tax 3 - (3) B
--- --- ---
Total Earnings $315 $(85) $(3)
Total Earnings -
Noncontrolling
Interests (17) - -
--- --- ---
Total Earnings -
Controlling Interests $298 $(85) $(3)
==== ==== ===
EARNINGS PER SHARE,
BASIC $0.47 $(0.14) $-
------------------- ===== ====== ===
EARNINGS PER SHARE,
DILUTED $0.47 $(0.14) $-
------------------- ===== ====== ===
Total Ongoing
Adjustments Earnings
----------- --------
SEGMENT EARNINGS BEFORE INTEREST AND
TAXES FROM CONTINUING OPERATIONS
------------------------------------
U.S. Transmission $- $217
Distribution - 152
Western Canada Transmission &
Processing - 81
Field Services (135) 15
Total Reportable Segment EBIT (135) 465
Other - (24)
--- ---
Total Reportable Segment and Other
EBIT $(135) $441
===== ====
EARNINGS
--------
Total Reportable Segment EBIT and
Other EBIT $(135) $441
Interest Expense - (150)
Interest Income and Other - 25
Income Taxes from Continuing
Operations 50 (89)
Discontinued Operations, net of Tax (3) -
--- ---
Total Earnings $(88) $227
Total Earnings -Noncontrolling
Interests $- (17)
--- ---
Total Earnings - Controlling Interests $(88) $210
==== ====
EARNINGS PER SHARE, BASIC $(0.14) $0.33
------------------------- ====== =====
EARNINGS PER SHARE, DILUTED $(0.14) $0.33
--------------------------- ====== =====
A -Recognition of a deferred gain associated with units previously
issued by DCP Midstream's master limited partnership.
B - Net revenues from Sonatrach settlement.
Weighted Average Shares (reported and ongoing) - in millions
Basic
628
Diluted
629
SOURCE Spectra Energy Corp