Spectra Energy Reports Third Quarter 2009 Results
- Reported net income (controlling interests) of $191 million, $0.30 earnings per share (EPS), versus prior year quarter's $296 million, $0.48 EPS
- 2009 capital expansion program substantially complete, delivering returns on capital of more than 12 percent - exceeding the top end of targeted range
- On track to achieve 2009 $1.15 ongoing EPS target
- Press Release
- Source: Spectra Energy Corp
- On 6:30 am EST, Thursday November 5, 2009
HOUSTON, Nov. 5 /PRNewswire-FirstCall/ -- Spectra Energy Corp (NYSE: SE - News) today reported 2009 third quarter net income from controlling interests of $191 million, or $0.30 EPS, compared with $296 million, or $0.48 diluted EPS, in the prior year quarter. Ongoing net income was $190 million, or $0.30 EPS, versus $302 million, or $0.49 EPS, during the same period last year.
Related Quotes
| Symbol | Price | Change |
|---|---|---|
| SE | 19.10 | +0.09 |
(Logo: http://www.newscom.com/cgi-bin/prnh/20061030/CLM051LOGO )
"Spectra Energy had a solid quarter. We saw good performance from our fee-based businesses, which helped to offset the effects of much lower commodity prices, and continued executing extremely well on our capital expansion plan. Our 2009 expansion projects are being completed on time and on budget and we are realizing returns on these projects that exceed the high end of our expectations," said Greg Ebel, president and chief executive officer, Spectra Energy Corp.
"We are on track to meet the financial goals we have set for the year, including our 2009 EPS target of $1.15 and, given our 2010 expansion projects, we are well positioned to experience good earnings growth," said Ebel.
SEGMENT RESULTS
U.S. Transmission
U.S. Transmission reported third quarter 2009 earnings before interest and taxes (EBIT) of $239 million, compared with $213 million in third quarter 2008. The 2008 period included a $4 million charge for the final resolution of a customer bankruptcy settlement.
Ongoing EBIT for third quarter 2009 was $239 million and, excluding the above special item, compares with $217 million in the prior year quarter. The segment benefited from business expansion projects and capitalization of previously expensed project development costs. These earnings were partially offset by lower gas processing revenues as a result of lower prices and volumes, and a non-cash regulatory accounting adjustment related to Southeast Supply Header.
Distribution
Distribution reported third quarter 2009 EBIT of $48 million, compared with $44 million in third quarter 2008. Excluding the effect of the weaker Canadian dollar, earnings were $6 million higher this quarter. The segment continued to benefit from higher storage and transportation revenues during the period.
Western Canada Transmission & Processing
Western Canada Transmission & Processing reported third quarter 2009 EBIT of $84 million, compared with $113 million during third quarter 2008. Excluding the effect of the weaker Canadian dollar, earnings were $24 million lower than in 2008. Improved revenues in the fee-based gathering and processing business, due primarily to stronger activity in the Fort Nelson and Grizzly Valley regions, were more than offset by lower Empress earnings, primarily as a result of lower frac spreads. Frac spreads at Empress averaged $6.75 for the quarter, compared with $10.86 in third quarter 2008.
Field Services
Field Services reported third quarter 2009 EBIT of $45 million, compared with $239 million in third quarter 2008. The decrease in earnings was primarily driven by lower commodity prices. During third quarter 2009, crude oil averaged approximately $68 per barrel, compared with approximately $118 per barrel in the prior year quarter and the NGL to crude relationship averaged 42 percent versus 51 percent in third quarter 2008. Additionally, NYMEX natural gas averaged $3.39 per million British thermal unit (MMBtu), compared with $10.24 per MMBtu during the same period in 2008.
Third quarter results were also affected by higher interest expense and lower non-cash mark-to-market gains on hedges used to protect distributable cash flow at DCP Midstream's master limited partnership. The decrease in earnings was partially offset by lower operating costs as a result of continued cost reduction initiatives.
For the quarter, DCP Midstream paid distributions of $31 million to Spectra Energy. DCP Midstream expects to have paid to Spectra Energy distributions totaling approximately $100 million by the end of the year.
Other
"Other" reported net costs of $10 million in third quarter 2009, compared with net costs of $9 million in third quarter 2008.
Interest Expense
Interest expense was $160 million for third quarter 2009, compared with $163 million for third quarter 2008.
Income Taxes
Third quarter 2009 income tax expense from continuing operations was $54 million, compared with $145 million reported in third quarter 2008. The decrease was primarily a result of lower earnings in 2009, as well as a lower effective tax rate. The effective tax rate was 20 percent in third quarter 2009, compared with 32 percent in third quarter 2008. The lower effective tax rate in third quarter 2009 is primarily the result of a higher proportion of earnings coming from Canadian sources that are taxed at lower rates, and favorable tax settlements.
Special Items Affecting Spectra Energy's EPS for the Quarters Include:
(in millions, except per-share amounts)
---------------------------------------
Net Income -
Controlling
Pre-tax Interests EPS
Amount Tax Effect Impact Impact
------- ---------- ------------ ------
Third Quarter 2009 $- $- $- $-
== == == ==
Third Quarter 2008
Customer
Bankruptcy
Settlement $(4) $1 $(3) $-
--- -- --- --
Total Special
Items $(4) $1 $(3) $-
=== == === ==
Reconciliation of Reported to Ongoing Net Income
(in millions)
------------
Quarters Ended
September 30,
2009 2008
---- ----
Net Income - Controlling Interests
as Reported $191 $296
Adjustments to Reported Net Income -
Controlling Interests:
Special Items - 3
Discontinued Operations (1) 3
--- -
Ongoing Net Income $190 $302
==== ====
Reconciliation of Reported to Ongoing Diluted EPS
-------------------------------------------------
Quarters Ended
September 30,
2009 2008
---- ----
Diluted EPS as Reported $0.30 $0.48
Discontinued Operations - 0.01
- ----
Diluted EPS, Ongoing $0.30 $0.49
===== =====
Additional Information
Additional information about third quarter 2009 earnings can be obtained on the Spectra Energy Web site: www.spectraenergy.com.
The Analyst call is scheduled for 9 a.m. CT today, November 5, to discuss Spectra Energy's third quarter results. The webcast can be accessed on the Investors Section of Spectra Energy's Web site and 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 "34956220" 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 7:00 p.m. CT, February 12, 2010, by dialing (800) 642-1687 with conference ID 34956220. 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. Ongoing diluted EPS is also used as a basis for employee incentive bonuses.
The primary performance measure used by us to evaluate segment performance is segment EBIT from continuing operations, which at the segment level represents all profits from continuing operations (both operating and non-operating) before deducting interest and taxes, and is net of non-controlling interests related to those profits. We consider segment EBIT from continuing operations, which is the GAAP measure used to report segment results, to be a good indicator of each segment's operating performance as it represents the results of our ownership interests 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 provide 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; our ability to obtain financing on favorable terms, which can be affected by various factors, including our credit ratings and general economic conditions; the levels of supply and demand for natural gas in our areas of operation; 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; the effects of accounting pronouncements issued periodically by accounting standard-setting bodies; the extent of success in connecting natural gas supplies to gathering, processing and transmission systems and in connecting to expanding gas markets; 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; 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 2008 Form 10-K, filed on February 27, 2009, 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 - News), 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 was recently ranked by FORTUNE as the world's "most admired" pipeline company. For more information, visit www.spectraenergy.com.
Spectra Energy Corp
Quarterly Highlights
September 2009
(Unaudited)
(In millions, except per-share amounts and where noted)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2009 2008 2009 2008
------------ ---- ---- ---- ----
COMMON STOCK DATA
Earnings Per Share
From Continuing Operations
Basic $0.30 $0.49 $0.98 $1.54
Diluted $0.30 $0.48 $0.98 $1.53
Earnings Per Share
Basic $0.30 $0.48 $0.98 $1.53
Diluted $0.30 $0.48 $0.98 $1.52
Dividends Per Share $0.25 $0.25 $0.75 $0.71
Weighted-Average
Shares Outstanding
Basic 646 615 640 626
Diluted 647 617 641 629
------
INCOME
Operating Revenues $933 $1,080 $3,254 $3,813
Total Reportable Segment EBIT 416 609 1,372 1,926
Income from Discontinued
Operations, Net of Tax 1 (2) 3 (1)
Net Income -
Controlling Interests 191 296 629 958
-----------------
EBIT BY BUSINESS SEGMENT
U.S. Transmission $239 $213 $690 $683
Distribution 48 44 240 263
Western Canada
Transmission &
Processing 84 113 223 333
Field Services 45 239 219 647
-- --- --- ---
Total Reportable Segment EBIT 416 609 1,372 1,926
Other EBIT (10) (9) (46) (57)
--- -- --- ---
Total Reportable
Segment and
Other EBIT $406 $600 $1,326 $1,869
==== ==== ====== ======
----------------
CAPITAL AND INVESTMENT
EXPENDITURES (a)
U.S. Transmission $635 $1,098
Distribution 171 274
Western Canada
Transmission &
Processing 236 139
Other 21 24
-- --
Total Capital and
Investment
Expenditures $1,063 $1,535
====== ======
Sept. 30, Dec. 31,
2009 2008
-------------- ---- ----
CAPITALIZATION
Common Equity -
Controlling Interests 39% 34%
Noncontrolling Interests
and Preferred Stock 4% 4%
Total Debt 57% 62%
----------- ------- -------
Total Debt $10,204 $10,047
Book Value Per Share (b) $10.72 $9.07
Actual Shares Outstanding 647 611
(a) Includes loans to affiliates for capital expansion projects.
(b) Represents controlling interests.
Spectra Energy Corp
Quarterly Highlights
September 2009
(Unaudited)
(In millions, except where noted)
Three Months Nine Months
Ended Ended
September 30, September 30,
------------- -------------
2009 2008 2009 2008
----------------- ---- ---- ---- ----
U.S. TRANSMISSION
Operating Revenues $427 $402 $1,246 $1,205
Operating Expenses
Operating, Maintenance
and Other 126 156 390 433
Depreciation and
Amortization 61 58 182 174
Gains on Sales of Other
Assets and Other, net 1 - 11 32
Other Income and Expenses 19 39 60 94
Noncontrolling Interests 21 14 55 41
-- -- -- --
EBIT $239 $213 $690 $683
---- ---- ---- ----
Proportional Throughput,
TBtu (a) 607 479 1,894 1,596
------------
DISTRIBUTION
Operating Revenues $244 $280 $1,236 $1,433
Operating Expenses
Natural Gas Purchased 62 97 617 747
Operating, Maintenance
and Other 89 93 252 284
Depreciation and
Amortization 44 45 126 138
Other Income and Expenses (1) (1) (1) (1)
EBIT $48 $44 $240 $263
--- --- ---- ----
Number of Customers,
thousands 1,315 1,300
Heating Degree Days,
Fahrenheit 348 264 4,964 4,815
Pipeline Throughput,
TBtu 133 153 589 631
---------------------------
WESTERN CANADA TRANSMISSION & PROCESSING
Operating Revenues $260 $397 $770 $1,174
Operating Expenses
Natural Gas and
Petroleum Products
Purchased 38 136 143 384
Operating, Maintenance
and Other 103 110 299 342
Depreciation and
Amortization 38 37 105 114
Other Income and Expenses 3 (1) - -
Noncontrolling Interests - - - 1
- - - -
EBIT $84 $113 $223 $333
--- ---- ---- ----
Pipeline Throughput, TBtu 148 150 446 454
Volumes Processed, TBtu 163 183 494 526
Empress Inlet Volumes,
TBtu 169 218 578 644
--------------
FIELD SERVICES
Equity in Earnings of DCP
Midstream, LLC $45 $239 $219 $647
EBIT $45 $239 $219 $647
--- ---- ---- ----
Natural Gas Gathered and
Processed/Transported,
TBtu/day (b) 7.0 6.6 7.0 7.1
Natural Gas Liquids
Production, MBbl/d (b,c) 371 340 354 365
Average Natural Gas Price
Per MMBtu (d) $3.39 $10.24 $3.93 $9.73
Average Natural Gas
Liquids Price Per Gallon $0.69 $1.44 $0.63 $1.42
-----
OTHER
Operating Revenues $12 $11 $36 $32
Operating Expenses 30 19 90 85
Other Income and Expenses 8 (1) 8 (4)
EBIT $(10) $(9) $(46) $(57)
---- --- ---- ----
(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)
Three Months Nine Months
Ended Ended
September 30, September 30,
------------ -------------
2009 2008 2009 2008
---- ---- ---- ----
Operating
Revenues $933 $1,080 $3,254 $3,813
Operating
Expenses 581 740 2,170 2,669
Gains on Sales
of Other
Assets and
Other, net 1 - 11 32
-
--- -- ----- -----
Operating
Income 353 340 1,095 1,176
--- --- ----- -----
Other Income
and Expenses 72 282 302 755
Interest
Expense 160 163 456 470
--- --- --- ---
Earnings From
Continuing
Operations
Before Income
Taxes 265 459 941 1,461
Income Tax
Expense From
Continuing
Operations 54 145 260 453
-- --- --- ---
Income From
Continuing
Operations 211 314 681 1,008
Income (Loss)
From
Discontinued
Operations,
net of tax 1 (2) 3 (1)
-- -- -- --
Net Income 212 312 684 1,007
Net Income -
Noncontrolling
Interests 21 16 55 49
-- -- -- --
Net Income -
Controlling
Interests $191 $296 $629 $958
==== ==== ==== ====
Spectra Energy Corp
Condensed Consolidated Balance Sheets
(Unaudited)
(In millions)
September 30, December 31,
2009 2008
---- ----
ASSETS
Current Assets $1,527 $1,450
Investments and
Other Assets 6,306 5,950
Net Property, Plant
and Equipment 15,109 13,639
Regulatory Assets
and Deferred Debits 996 885
--- ---
Total Assets $23,938 $21,924
======= =======
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current Liabilities $2,257 $3,044
Long-term Debt 9,347 8,290
Deferred Credits
and Other
Liabilities 4,629 4,355
Preferred Stock of
Subsidiaries 225 225
Stockholders' Equity 7,480 6,010
----- -----
Total Liabilities
and Stockholders'
Equity $23,938 $21,924
======= =======
Spectra Energy Corp
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In millions)
Nine Months
Ended
September 30,
-------------
2009 2008
---- ----
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income $684 $1,007
Adjustments to reconcile net
income to net cash provided by
operating activities 583 389
--- ---
Net cash provided by operating activities 1,267 1,396
----- -----
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used in investing activities (732) (1,564)
---- ------
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash provided by (used in)
financing activities (289) 354
---- ---
Effect of exchange rate changes on cash (10) 1
--- --
Net increase in cash and cash equivalents 236 187
Cash and cash equivalents at beginning of period 214 94
--- --
Cash and cash equivalents at end of period $450 $281
==== ====
Spectra Energy Corp
Reported to Ongoing Earnings Reconciliation
September 2009 Quarter-to-date
(In millions, except per-share amounts)
Discon-
tinued Total
Reported Special Opera- Adjust- Ongoing
Earnings Items tions ments Earnings
-------- ------ ------ ------ --------
SEGMENT EARNINGS
BEFORE INTEREST
AND TAXES FROM
CONTINUING
OPERATIONS
U.S. Transmission $239 $- $- $- $239
Distribution 48 - - - 48
Western Canada
Transmission &
Processing 84 - - - 84
Field Services 45 - - - 45
--- --- --- --- ---
Total Reportable
Segment EBIT 416 - - - 416
Other (10) - - - (10)
--- --- --- --- ---
Total Reportable
Segment and Other
EBIT $406 $- $- $- $406
=== === === === ===
EARNINGS
Total Reportable
Segment EBIT and
Other EBIT $406 $- $- $- $406
Interest Expense (160) - - - (160)
Interest Income
and Other 19 - - - 19
Income Taxes from
Continuing
Operations (54) - - - (54)
Discontinued
Operations,
Net of Tax 1 - (1) A (1) -
--- --- --- --- ---
Total Earnings $212 $- $(1) $(1) $211
Total Earnings -
Noncontrolling
Interests (21) - - - (21)
--- --- --- --- ---
Total Earnings -
Controlling
Interests $191 $- $(1) $(1) $190
=== === === === ===
EARNINGS PER SHARE,
BASIC $0.30 $- $- $- $0.30
=== === === === ===
EARNINGS PER SHARE,
DILUTED $0.30 $- $- $- $0.30
=== === === === ===
A - Net results from Nevis and Brazeau River gathering and
processing facilities in Western Canada.
Weighted Average Shares (reported and ongoing) - in millions
Basic 646
Diluted 647
Spectra Energy Corp
Reported to Ongoing Earnings Reconciliation
September 2008 Quarter-to-date
(In millions, except per-share amounts)
Discon-
tinued Total
Reported Special Opera- Adjust- Ongoing
Earnings Items tions ments Earnings
-------- ------ ------ ------ --------
SEGMENT EARNINGS
BEFORE INTEREST
AND TAXES
FROM CONTINUING
OPERATIONS
U.S. Transmission $213 $4 A $- $4 $217
Distribution 44 - - - 44
Western Canada
Transmission &
Processing 113 - - - 113
Field Services 239 - - - 239
--- --- --- --- ---
Total Reportable
Segment EBIT 609 4 - 4 613
Other (9) - - - (9)
--- --- --- --- ---
Total Reportable
Segment and Other EBIT $600 $4 $- $4 $604
=== === === === ===
EARNINGS
Total Reportable Segment
EBIT and Other EBIT $600 $4 $- $4 $604
Interest Expense (163) - - - (163)
Interest Income and Other 22 - - - 22
Income Taxes from
Continuing Operations (145) (1) - (1) (146)
Discontinued Operations,
Net of Tax (2) - 2 B 2 -
--- --- --- --- ---
Total Earnings $312 $3 $2 $5 $317
Total Earnings -
Noncontrolling Interests (16) - 1 $1 (15)
--- --- --- --- ---
Total Earnings -
Controlling Interests $296 $3 $3 $6 $302
=== === === === ===
EARNINGS PER
SHARE, BASIC $0.48 $- 0.01 $0.01 $0.49
=== === === === ===
EARNINGS PER
SHARE, DILUTED $0.48 $- 0.01 $0.01 $0.49
=== === === === ===
A - Bankruptcy settlement of a customer's transportation contract.
B - Net results from Nevis and Brazeau River gathering and processing
facilities in Western Canada.
Weighted Average Shares (reported and ongoing) -
in millions
Basic 615
Diluted 617
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